Can WPZ Meet Its Distribution Growth Targets for 2018?



Williams Partners’ distribution forecast

Williams Partners (WPZ) declared a flat dividend of $0.15 (or $0.60 annualized) per share for 4Q17. The partnership is expecting to grow its distribution by 5.0%–7.0% in 2018 and thereafter.

The partnership could meet its distribution growth targets in 2018 considering the contributions from the Transco expansion projects, strong coverage, and an improved financial position. However, project delays and a decline in its Northeast drilling activity could weigh on the partnership’s distribution plans in 2018.

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Williams Partners’ distribution yield

Based on its recent quarter distribution, Williams Partners is trading at a distribution yield of 6.5%. This is slightly above the one-year average of 6.5%. WPZ’s peers Spectra Energy Partners (SEP) and Boardwalk Pipeline Partners (BWP) are currently trading at 7.7% and 3.6%, respectively.

Analyst recommendations

About 80.0% of analysts rate Williams Partners as a “buy,” and the remaining 20.0% rate it as a “hold.” Barclays last downgraded WPZ to a “hold.” WPZ’s peers Energy Transfer Partners (ETP) and Kinder Morgan (KMI) have “buy” ratings from 75.0% and 54.5% of analysts, respectively.

WPZ is currently trading below the low range ($43.00) of analysts’ target price. WPZ’s average target price of $46.30 implies a 26.0% upside potential from the current price levels.


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