TC PipeLines - An MLP for Income Portfolio - Analyst Blog

On June 11, Zacks Investment Research upgraded Houston, TX-based publicly traded natural gas transporter TC PipeLines L.P. TCP to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

TC PipeLines' steady cash-flow generating pipeline assets provide stability and financial capacity to deliver cash distributions in a disciplined manner.

Detailed Analysis

TC PipeLines owns stakes in natural gas transportation assets, which generate stable, recurring and low-risk earnings and cash flows. Over the last few years, the partnership has consolidated its business through a combination of organic efforts and accretive acquisitions.

Of particular significance is its stake in the Northern Border Pipeline, a key link in natural gas transportation from western Canada to the U.S Midwest. Northern Border's market share position enables it to maintain strong relationships with shippers.

TC PipeLines continues to leverage its relationship with parent TransCanada Corp. TRP to make ‘drop-down' transactions (or asset buys from the partnership's sponsor company).

TC PipeLines has established a track record of providing stable and growing cash distribution to unitholders. The partnership has a proven history of distribution growth with 14 hikes in as many years. Its current quarterly distribution of 81 cents per unit ($3.24 per unit annualized) yields an attractive 6.4%.

Finally, the partnership's conservative capital structure and investment rate credit ratings are real assets in this highly uncertain period for the economy.  

Based on the success of the partnership's high-quality and diverse portfolio of energy infrastructure assets, analysts are predicting strong earnings growth for TC PipeLines over 2014. The current year Zacks Consensus Estimate of $2.74 represents earnings per unit growth of 29% over 2013.

Other Stocks to Consider

Apart from TC PipeLines, investors interested in the energy pipeline partnerships may consider stocks like Delek Logistics Partners L.P. DKL and Boardwalk Pipeline Partners L.P. BWP. Both these stocks carry a Zacks Rank #1 (Strong Buy).
 

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