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

Summit Midstream Partners LP (NYSE:SMLP) may very well be on this list next year, sporting a coverage ratio of 1.2 times its payout. It is showing investors that even with the 4% increase from the first quarter’s distribution, it is generating plenty of cash.

Targa Resources Partners LP (NYSE:NGLS) is the only one of our big increasers that doesn’t look great here. It boosted its distribution 11% year over year, but didn’t actually didn’t generate enough distributable cash flow to cover payments this quarter. When this happens, it doesn’t mean the partnership is in trouble, necessarily, but investors should probably investigate to make sure it isn’t the beginning of a long-term trend. In Targa Resources Partners LP (NYSE:NGLS)’s case, management expected to fall short this quarter, while finishing the year above 1.0 times coverage.

Finally, it is clear that Alliance Resource Partners, L.P. (NASDAQ:ARLP), despite being one of those risky coal MLPs, has its business well in hand. You will never see a midstream MLP with a coverage ratio that high; it would simply pay out more cash. It makes sense for a coal MLP, however, to pay out less in the name of stability. Alliance Resource Partners, L.P. (NASDAQ:ARLP) is up 27% this year — unprecedented for coal miners — and you can bet it has a lot to do with its distribution growth and its ability to cover its distributions.

Bottom line
There are more MLP options for investors to consider than ever before, and investors can afford to be extremely picky. Running a few simple calculations can help you pick out strong performers for further research.

The article 5 MLPs Handing out More Cash originally appeared on Fool.com and is written by Aimee Duffy.

Fool contributor Aimee Duffy has no position in any stocks mentioned. The Motley Fool recommends Alliance Resource Partners, L.P.

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