MLPW

MLP Speak: A Critique of Distributable Cash Flow

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–> Handout 1: Pitfalls of Distribution Yield Analysis (pdf) –> Handout 2: Linking P/DCF to Enterprise Free Cash Flow Valuation (pdf) Let’s talk about a controversial metric that is used in master limited partnership (MLP) reporting. Just how useful is it, and should it be allowed? By Brian Nelson, CFA It’s been a few years since the fallout in the prices of most master limited partnerships (AMLP), but to me, it still feels like yesterday. We continue to have many concerns about the longevity of the business models of MLPs, and we maintain our view that the operating structure will be challenged over the long haul. New equity and debt funding (issuance) continues to, in part, fuel the distributions of most MLPs, … Read more

Fantasy Yields Are For Fools

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Brian Nelson, CFA We spend a lot of time talking about the safety of a firm’s dividend. In fact, we were the pioneers of the Dividend Cushion ratio, a comprehensive cash-flow based measure of the health of a firm’s dividend that takes into consideration all aspects of the company’s financial statements – not just the relationship between dividends per share and earnings per share, the payout ratio. As readers have come to learn, if a company’s Dividend Cushion ratio is below 0, there is significant risk to the sustainability of the payout. Most recently, the Dividend Cushion ratio highlighted the substantial risk related to Seadrill’s (SDRL) payout (in advance of the suspension), and the Cushion, as we call it here … Read more