MLPs: It's All About The Distribution Growth Rate
By Tyson Halsey:
Income Growth Advisors sold Calumet Specialty Products, LP (CLMT) and bought Targa Resources Corp. (TRGP) for its MLP clients
Calumet Specialty Products LP is a company that we have owned for years for our clients. They had had some operating difficulties, did not hedge effectively, and declined from 55 and then to below 10 during the 2008-9 market crash. The company has recovered, rebounded, and closed Friday, December 9, 2011 at $19.38 per share. CLMT trades with a yield of 10% based on a distribution on the trailing twelve months of $1.94/unit. The yield is up from $1.825/unit in 2010 — which is a respectable 6.3% distribution growth rate. Generally, a good distribution rate plus a good distribution yield, is the key to successful MLP investing. However, we believe the distribution growth rate at CLMT will moderate to the 2-3% level for the next year or more. Further, with theComplete Story »
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