Why Buckeye Partners Doesn’t Expect a Distribution Cut in 2018

In this article, we’ll look into Buckeye Partners’ (BPL) distribution plans for 2018. But first, let’s look into BPL’s recent quarter distribution. Buckeye Partners declared a flat distribution of $1.2625 per unit for the fourth quarter of 2017, which represented a 2.0% YoY (year-over-year) increase compared to the same quarter in the previous year. Based on the current distribution, the publicly traded partnership is trading at an attractive distribution yield of 9.9%. 

Buckeye Partners managed to cover its distribution in the fourth quarter of 2017 with distribution coverage of 1.01x. BPL expects its distribution coverage to fall below 1 in 2018 due to lower terminal capacity utilization and other factors. However, the partnership doesn’t expect to announce a distribution cut even if its distribution coverage falls below 1.

Buckeye Partners’ peer NuStar Energy (NS) recently announced a ~45% distribution cut, effective the first quarter of 2018. This cut was mainly due to a massive decline in the partnership’s distribution coverage.

In the next part of this series, we’ll look into Buckeye Partners’ outlook and recent analyst recommendations.