PSXP’s forward yield
As we learned in the previous article, Phillips 66 Partners (PSXP) is trading at a forward distribution yield of ~4%. This is lower than the average 7.1% yield of its peers PBF Logistics (PBFX), Tesoro Logistics (TLLP), Delek Logistics (DKL), Holly Energy Partners (HEP), and Valero Energy Partners (VLP).
The forward distribution yield of a company is calculated by dividing its estimated one-year future distribution per unit by its market price per unit.
PSXP’s expected distribution growth
Over the next two years, Phillips 66 Partners is expected to have compound distribution growth of 26%. In comparison, Valero Energy Partners, Delek Logistics, PBF Logistics, Holly Energy Partners, and Tesoro Logistics are expected to have annual distribution growths of 24%, 12%, 15.7%, 7.9%, and 15%, respectively.
PSXP’s and VLP’s higher expected distribution growths may justify their relatively lower forward yields. The above graph compares the forward distribution yields of the six logistics MLPs to their expected distribution growths.
PSXP’s EV-to-EBITDA multiple
Phillips 66 Partners’ EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) ratio, using a trailing 12-month EBITDA, is 37.8. In comparison, the ratios for Valero Energy Partners, Delek Logistics, PBF Logistics, Holly Energy Partners, and Tesoro Logistics are 16.8, 9.8, 10.7, 12.6, and 12.3, respectively.
Phillips 66 Partners’ forward EV-to-EBITDA multiple is 15.1. The forward ratio is based on estimates for the current year’s EBITDA. PSXP’s lower forward ratio indicates expectations of EBITDA growth in 2016.
In comparison, the forward EV-to-EBITDA ratios for Valero Energy Partners, Delek Logistics, PBF Logistics, Holly Energy Partners, and Tesoro Logistics are 12.2, 9, 9.8, 11.2, and 9.6, respectively.