Targa Resources Partners LP (NGLS), Western Gas Partners, LP (WES), Summit Midstream Partners LP (SMLP): Five MLPs Handing out More Cash

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Investors in master limited partnership care about two things: distributions and distribution growth. Today, we are looking at five MLPs that significantly boosted their distributions for the second quarter, while also considering how sustainable those distributions really are.

Show me the growth!
Let’s take a look at some notable distribution increases from the second quarter, evaluating the growth on both a sequential and annual basis:

Company QOQ YOY
Targa Resources Partners LP (NYSE:NGLS) 3% 11%
Western Gas Partners, LP (NYSE:WES) 4% 17%
Atlas Pipeline Partners, L.P. (NYSE:APL) 5% 11%
Alliance Resource Partners, L.P. (NASDAQ:ARLP) 2% 8.5%
Summit Midstream Partners LP (NYSE:SMLP) 4% N/A

Source: Company releases

The most impressive gains posted here come from the traditional midstream MLPs, which isn’t too much of a surprise. These partnerships tend to sport more reliable income streams than MLPs in other energy sub-sectors that might have higher exposure to commodity risk. Alliance Resource Partners is a coal MLP, but it is so well run that it can hang with the big increases of the midstream sector.

Summit Midstream Partners LPSummit Midstream Partners LP (NYSE:SMLP) only went public last winter, so there is no year-over-year comparison available for its distribution. However, this young buck is currently the second-best performing MLP year to date, posting a total return of more than 80%. Investors are being rewarded twofold right now, with substantial sequential distribution increases on top of an industry-leading unit price appreciation. Only time will tell if Summit Midstream Partners LP (NYSE:SMLP) will be back on this list next year.

A love that lasts
Distribution growth is important, but the ability to maintain impressive growth matters, too. For that, we turn to the distribution coverage ratio. This simple metric shows you whether or not a partnership’s distributable cash flow covers the actual amount of distributions paid out during that period.

Company DCF Paid Distributions Coverage Ratio
Targa Resources Partners $79 $102 0.8
Western Gas Partners $90 $79 1.13
Atlas Pipeline Partners $58 $54 1.07
Alliance Resource Partners $117 $42 2.79
Summit Midstream Partners $28 $23 1.2

Source: Company releases

Taking these two charts together, it’s hard to ignore what’s going on at Western Gas Partners, LP (NYSE:WES). Its distribution is up 17% year over year and it easily cleared that payout with the cash it generated this quarter. If this MLP wasn’t on your radar before, it should be now.

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