Midstream earnings ramp up next week, but many announcements of third quarter distributions have already surfaced.
Thirteen of the 15 constituents in the Alerian MLP Infrastructure Index (AMZI), tracked by the Alerian MLP ETF (AMLP), have announced third quarter distributions. AMZI is a capped, float-adjusted, capitalization-weighted composite of energy infrastructure MLPs that earn the majority of their cash flow from midstream activities.
Midstream has made significant progress rebuilding a track record of growing payouts since the energy market volatility and pandemic-related uncertainty of 2020. Through the second quarter, there have been four consecutive quarters in which there were no dividend cuts across the Alerian energy infrastructure index suite.
Out of the 13 constituents in AMZI that have announced third quarter distributions, there have been zero cuts; five constituents are growing their dividend, and eight are maintaining.
The five MLPs that grew distributions for the third quarter include Cheniere Energy Partners LP (CQP), Energy Transfer LP (ET), Hess Midstream LP (HESM), Magellan Midstream Partners LP (MMP), and Delek Logistics Partners LP (DKL).
Energy Transfer on Tuesday announced a quarterly cash distribution of $0.265 per ET common unit for the third quarter. The distribution per unit is more than a 70% increase over the third quarter of 2021 and is a 15% increase over the second quarter of 2022, according to a statement from Energy Transfer.
Delek Logistics on Tuesday announced its quarterly cash distribution for the third quarter of $0.99 per common limited partner unit. This represents a 4.2% increase from the distribution for the third quarter of 2021 and a 0.5% increase from the distribution for the second quarter of 2022, according to a statement from Delek Logistics.
Hess Midstream on Monday declared a quarterly cash distribution of $0.5627 per Class A share for the third quarter, representing a 5% increase compared to the distribution for the third quarter of 2021, and a 1.2% increase compared to last quarter, according to a statement from Hess Midstream.
Cheniere Partners on Monday declared a cash distribution of $1.07 per common unit, comprising a base amount of $0.775 and a variable amount of $0.295, according to a statement from the company. This is an increase of 57.4% from the third quarter of 2021 and an increase of 0.9% from the second quarter of 2022.
Magellan last week announced distributions of $1.0475 per unit for the third quarter, which is 1% higher than the $1.0375 paid for both the second quarter of 2022 and the third quarter of 2021, according to a statement from Magellan.
The companies that have announced they will be maintaining distributions include Crestwood Equity Partners LP (CEQP), DCP Midstream LP (DCP), EnLink Midstream LLC (ENLC), Enterprise Products Partners LP (EPD), Holly Energy Partners LP (HEP), Plains All American Pipeline LP (PAA), Genesis Energy LP (GEL), and Western Midstream Partners LP (WES).
The two constituents that have yet to announce distributions for the third quarter are MPLX LP (MLPX) and NuStar Energy LP (NS).
As a reminder, MLPs are pass-through entities and do not pay taxes at the company level if 90% or more of their income is from qualifying sources. This has historically allowed MLPs to pay out more of their cash flows to investors as distributions.
MLPs do not have the double taxation associated with corporate dividends and have historically provided attractive income that is largely a tax-deferred return of capital, meaning that taxes are not paid on that portion of the distribution until the investor sells their position. Typically, between 70% and 100% of MLP distributions are considered a tax-deferred return of capital, according to VettaFi.
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