Diversified midstream energy operator Genesis Energy L.P. ( GEL ) raised its fourth quarter 2012 cash distribution to 48.50 cents per unit ($1.94 per unit annualized), representing an increase of approximately 2.6% sequentially and 10.2% year over year. Importantly, the latest payout marks the 30th consecutive quarterly distribution hike by the pipeline operator, of which 25 increases have been 10% or more year over year.
Genesis Energy's announced distribution boost is in sync with its goal of delivering disciplined growth to unitholders. The partnership boasts of a consistent and improving financial policy with high distribution coverage. Genesis Energy's new distribution is payable on February 14 to unitholders of record as on February 1, 2013.
Houston, Texas-based Genesis Energy is a master limited partnership that operates crude oil pipelines and is an independent gatherer and marketer of crude oil in North America, with operations concentrated in Texas, Louisiana, Alabama, Florida, Mississippi and New Mexico. Genesis Energy engages in three business segments: Pipeline Transportation, Refinery Services, and Supply and Logistics.
Genesis Energy - which acquired interests in Gulf of Mexico oil pipelines from Marathon Oil Corp. ( MRO ) in January last year - currently retains a Zacks Rank # 4 (Sell), implying that it is expected to underperform the broader U.S. equity market over the next one to three months.
With a juicy distribution yield of 5.2%, a business model focused on operational efficiencies and attractive acquisitions/growth projects, Genesis Energy provides investors with a steady, predictable income stream.
However, valuation looks expensive for Genesis Energy. In particular, the partnership has a price-to-book (P/B) ratio of 3.2, which suggests that the stock is overvalued. (A P/B ratio under 3.0 generally indicates value.)
However, there are certain other energy stocks like Global Partners L.P. ( GLP ) and Sunoco Logistics Partners L.P. ( SXL ) that offer tremendous value and are worth buying now. Both these partnerships sport a Zacks Rank # 1 (Strong Buy).