Distribution Growth Defined: Western Gas Parnters (WES)

Lot’s of MLP’s talk about consistent and significant distribution growth, but Western Gas Partners, LP (WES) actually delivers.  Exhibit A:  On Friday the partnership declared a cash distribution of $0.50 per unit for the third quarter of 2012, representing a 4-percent increase over the prior quarter (yawn) and a 19-percent increase (WOW) over the third quarter of 2011.  Where else can you buy an income stream that increases 19-percent a year?  Bueller?  Anyone?  Did I mention that income stream was also tax deferred? 

The distribution increase does not come cheap though, the units are up 45% YoY, and even with the increased distribution yield only 3.9%.  WES had projected 15-20% distribution growth over the next two years, and the market has priced in that growth buy rewarding unit holders with higher equity value.  If you missed jumping on the WES distribution super high way (your not in the stock), than you are probably kicking yourself.  If you have a longer investment time frame, it may be time to take another look at WES.

Leave a Reply

Your email address will not be published. Required fields are marked *