Duncan Energy Partners L.P. (DEP) recently rewarded unitholders by raising its distribution 3.6%. The partnership already pays a hefty yield of 9.00%. It has surprised on the Zacks Consensus Estimate three quarters in a row.
Company Description
Duncan Energy is a partnership which transports and stores natural gas, provides NGL fractionation (or separation) and transportation and petrochemical storage and transportation.
The partnership has assets primarily in Texas and Louisiana, including 9,200 miles of natural gas pipelines and 1,600 miles of NGL and petrochemical pipelines.
Duncan Energy is managed by its general partner, DEP Holdings, LLC, which is wholly-owned by Enterprise Products Partners. Enterprise owns about 74% of the limited partner interests of Duncan Energy.
Duncan Surprised by 37.93% in the Second Quarter
On July 27, the partnership reported second quarter results that easily beat the Zacks Consensus Estimate by 11 cents. Earnings per unit were 40 cents compared with the Zacks Consensus Estimate of 29 cents.
The partnership acquired interests in midstream businesses in December 2008 (the “DEP II Midstream Businesses”) from Enterprise which resulted in an additional $15.3 million in earnings in the quarter compared to the year ago period.
“Our priority return in the cash flows of the DEP II Midstream Business, together with our share of the cash flows of the midstream businesses acquired by the partnership from Enterprise in February 2007, provides our partnership with a solid base of free cash flow to invest in growth capital projects that enhance our current group of businesses, reduce debt and support future increases in quarterly cash distribution payments to our partners,” said Richard H. Bachmann, president and CEO.
Distribution Raised by 3.6%
On July 15, the partnership raised the quarterly cash distribution payable to partners to 43.5 cents per unit, or $1.74 per unit annually. This is an increase of 3.6% over the 42 cents per unit the partnership paid in the second quarter of 2008.
Zacks Consensus Estimates Rise
Both the third quarter and the full year Zacks Consensus Estimates are moving higher.
The third quarter Zacks Consensus Estimate rose 1 penny in just the last week to 32 cents per unit.
The full year Zacks Consensus Estimate climbed 2 cents to $1.38 per unit in the last 7 days with 1 out of 9 covering analysts raising during that time. Analysts expect year over year earnings growth in 2009 of 13.21%.
Value Fundamentals
Duncan Energy Partners is a Zacks #1 Rank (strong buy) stock. It has a price-to-book ratio of just 0.28 which is well under the industry average of 1.22. The partnership trades with a forward P/E of 14.2.
