Buckeye Partners, L.P. (BPL), Chevron Corporation (CVX): 1 MLP to Buy in April

Buckeye has a history of buying under-utilized assets like Perth Amboy and operating them more profitably. In 2011 it bought $165 million in pipeline and terminal assets from BP plc (ADR) (NYSE:BP). Buckeye was able to add 32 third-party customers at the terminals which led to a 34% increase year over year in the asset’s adjusted EBITDA. The company sees a major opportunity to expand its terminals franchise by acquiring similar assets from major petrochemical companies and optimizing the operations for cash flow.

The Foolish bottom line
One final note, in 2010 Buckeye issued 20 million units to buyout its general partner. The midstream industry can get confusing, as investors in Kinder Morgan Inc (NYSE:KMI) for example, need to choose between that company’s four ways to invest. Buckeye on the other hand just offers one option. Other than simplicity, this move eliminated the incentive distribution rights that has the potential to ruin your MLP investment. This gives the company a cost of capital advantage when it needs to access the market to fund its growth.

This simplified structure also provides Buckeye with more cash to fund its distribution, which is currently just under 7%. As the company executes on its growth opportunities, it will generate more cash flow which will lead it to increase that distribution. That’s a recipe for future outperformance and enough for me to give Buckeye the “thumbs-up” in my CAPS profile.

The article 1 MLP to Buy in April originally appeared on Fool.com and is written by Matt DiLallo.

Fool contributor Matt DiLallo has no position in any stocks mentioned. The Motley Fool recommends Chevron and Kinder Morgan. The Motley Fool owns shares of Kinder Morgan.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.