Phillips 66 Partners LP’s (PSXP - Free Report) board of directors recently announced an increase in quarterly cash distribution for first-quarter 2019. It has increased the distribution to 84.5 cents per unit from 83.5 cents in the fourth quarter, representing an increase of 1.2% sequentially and 18% year over year.
Following the hike, the partnership’s new annualized distribution amounted to $3.38 per unit, up from $3.34 distributed earlier. This revised distribution is likely to be paid on May 14, 2019 to unitholders of record on Apr 30.
Should You Take Advantage of the Hikes?
The partnership’s strong financial position and strength in operations allow it to raise distributions and fund organic growth opportunities. Notably, in the last reported quarter, Phillips 66 Partners had accomplished its target of raising payout at a compound annual growth rate of 30% through 2018 since fourth-quarter 2013. The latest hike marks the partnership’s 22nd successive quarter of distribution increase since its initial public offering.
Investors should know that the consistent distribution hike of Phillips 66 Partners is indicative of stable fee-based revenues from its extensive midstream infrastructure that includes pipeline networks transporting raw crude, refined petroleum products and natural gas liquids.
The partnership is most likely to continue the trend of increasing cash distributions since it has a solid backlog of organic growth projects. It has several significant projects in its kitty, which are anticipated to be operational in the next few years. Through 2019, Phillips 66 Partners is planning to complete four major organic projects, namely Bayou Bridge Pipeline (segments I and II), Lake Charles products pipeline, Lake Charles isomerization unit and Gray Oak Pipeline. In 2020, the partnership plans to bring online three more organic projects, i.e. Sweeny to Pasadena products expansion, South Texas Gateway Terminal and Clemens Caverns expansion.
Notably, the Gray Oak pipeline is likely to partly solve the pipeline bottleneck problem in the prolific Permian basin. The pipeline network, expected to be operational by the December quarter of 2019, will transport oil to the key Texas Gulf Coast markets from Permian and Eagle Ford at a rate of 900,000 barrels per day.
Houston, TX-based Phillips 66 Partners — formed by Phillips 66 (PSX - Free Report) — is scheduled to report first-quarter 2019 results on Apr 30. The Zacks Consensus Estimate for the partnership’s first-quarter earnings is pegged at $1.03, indicating an increase of 18.4% from the year-ago reported figure.
Year to date, Phillips 66 Partners has gained 17.3% compared with 22% collective growth of the industry it belongs to.
Zacks Rank and Stocks to Consider
Phillips 66 Partners currently carries a Zacks Rank #3 (Hold). Investors interested in the energy sector can opt for some better-ranked stocks as given below:
Allentown, PA-based CrossAmerica Partners LP (CAPL - Free Report) is a refining and marketing firm. In 2019, its bottom line is expected to grow more than 550% year over year. The company currently holds a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Houston, TX-based Dril-Quip, Inc. (DRQ - Free Report) is an equipment and services provider for energy companies. In 2019, its bottom line, which has witnessed five upside revisions over the past 60 days, is expected to grow 81% year over year. The company currently holds a Zacks Rank #2 (Buy).
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