Western Gas Equity Partners (WGP) has the lowest distribution yield among its peers at 4.5%. This low yield can be attributed to its strong historical distribution growth and robust guidance for the coming years.
A company’s distribution yield is calculated by dividing its historical one-year future distribution per unit by its market price per unit. A low distribution yield results in a low cost of equity capital for MLPs, and vice versa.
Plains GP Holdings (PAGP) has highest distribution yield among its selected peers. Higher crude oil exposure and the removal of IDRs (incentive distribution rights) from PAGP’s subsidiaries’ capital structures could be the major reasons for its high yield compared to its peers and the Alerian MLP ETF (AMLP). AMLP has a distribution yield of 7.5%. Energy Transfer Equity (ETE) and EnLink Midstream LLC (ENLC) have lower distribution yields than AMLP.
In the next article, we’ll explore these equities’ recent leverage positions.