Many companies take pride in boosting the dividend payout
Oil storage and pipeline companyPlains All American Pipeline (
) has increased its distribution in 31 of the past 33
The distribution's current annualized yield is 5%, and the
payout has about doubled since 2002.
The company is a master limited partnership, which usually
means much of the cash flow is paid out to unit holders.
Business operations consist of three segments. The
transportation operations involve transporting crude oil and
refined products via pipelines, trucks and barges. The facilities
operations provide storage and terminaling of oil, natural gas
and refined products. The supply and logistics operations consist
of merchant activities such as buying and reselling oil.
The supply and logistics segment provides an opportunity to
benefit from oil-price differences, which have been significant
During Q2, supply and logistics was the top contributor to
performance. Chief Operating Officer Harry Pefanis said at the
Aug. 7 earnings call that "the Midland to Cushing differential
was probably the big blowout for the quarter," and "probably the
largest driver for the overperformance, first half of the
The West Texas Intermediate Midland-West Texas Intermediate
Cushing price differential averaged about $4.90 a barrel in Q2
vs. $1.50 a barrel in Q1. At one point in April the differential
was about $9 per barrel, the widest in 11 years.
Refinery downtime issues were the main cause of the
Plains' third-quarter guidance is now lower than Q2 results
partly due to the lower Midland-Cushing differential, CEO Greg
Armstrong said at the call.
Armstrong noted that "market conditions may not be as
favorable during the second half of 2012 as they were in the
Earnings increased 46% in the second quarter on a 10% pop in
revenue. The Street expects EPS to drop 14% in Q3 vs. the
year-ago period as revenue edges up 1%.
Given the company's history, though, the distribution might be
increased yet again.