Historical distribution growth
Williams Partners’ (WPZ) 1Q15 distributions remained flat following a 38% quarter-over-quarter increase in 4Q14. But, WPZ’s 1Q15 distributable cash flow also grew. This reflects the effect of the Access Midstream and Williams Partners merger deal. Access Midstream merged with Williams Partners in February 2015.
According to WPZ management, distributions are expected to stay flat for the rest of 2015. WPZ’s quarterly distribution per unit—$0.85 for the rest of 2015—should bring the total to $3.40 for the whole of 2015. This represents 43% YoY distribution growth in 2Q15 and 29% YoY for fiscal 2015.
One reason for WPZ’s flat distributions in 2015 could be its weak distribution coverage ratio. WPZ’s 1Q15 distribution coverage stood at 0.89x. The increase in the partnership’s distributable cash flow over the coming quarters should help boost its distribution coverage ratio to comfortable levels.
WPZ has a current distribution yield of 7.1%. The reasons for WPZ’s high distribution yield can be attributed to the IDRs (incentive distribution rights) present in its capital structure, its flat distributions in the most recent quarter, and its low coverage ratio.
WPZ peers Energy Transfer Partners (ETP) and Enbridge Energy Partners (EEP) also have IDRs in their capital structures. These companies are trading at a current distribution yield of 7.71% and 6.73%, respectively. Meanwhile, Enterprise Products Partners (EPD) has no IDRs, and it’s trading at a current yield of 4.98%. WPZ’s general partner Williams Companies (WMB), which is structured as a c-corp, has a current dividend yield of 4.08%.
ETP, EEP, EPD, and WPZ together make up ~29.5% of the Alerian MLP ETF (AMLP).