Why Buckeye Partners’ Declining Coverage Ratio Is a Concern
Buckeye Partners’ 2Q17 distributions
Buckeye Partners (BPL) declared a distribution of ~$1.26 per share for 2Q17, which represented a 4.1% YoY (year-over-year) increase over 2Q16 and a 1.0% sequential increase over 1Q17. Based on the recent distribution, BPL is trading at a distribution yield of 9.0%. However, that might not be sustainable in the long run.
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Buckeye Partners’ 2Q17 distribution coverage
Buckeye Partners’ distributable cash flow for 2Q17 was $170.4 million compared to $183.1 million during the second quarter of 2016. That’s a YoY rise of 7.0%. The quarterly distribution growth and a fall in distributable cash flows drove BPL’s coverage ratio lower to 0.95x. That means Buckeye Partners was unable to cover its distribution in the recent quarter. A further decline in distributable cash flow in the coming quarters would worsen its coverage position at the current distribution rate.
In the next part, let’s look at Buckeye Partners’ current expansion opportunities.