Asset sales cut Buckeye’s risk

Article Excerpt

BUCKEYE PARTNERS L.P. $31 (New York symbol BPL; Income Portfolio, Utilities sector; Units outstanding: 147.0 million; Market cap: $4.6 billion; Price-to-sales ratio: 1.1; Dividend yield: 9.7%; TSINetwork Rating: Average; www.buckeye.com) operates 9,700 kilometres of pipelines in the U.S. Northeast and Midwest. Its network pumps gasoline, jet fuel and other petroleum products. Following a strategic review, Buckeye will now sell its 50% in VTTI (which operates 135 oil terminals) and other pipelines. It expects total proceeds of $1.375 billion from the sale. It will use the funds to pay down its long-term debt of $5.0 billion (as of September 30, 2018). That’s a high 109% of Buckeye’s market cap. The partnership will cut its quarterly distribution by 40.6%; the new annual rate of $3.00 a unit still yields a high 9.7%. The new payout is a more sustainable 67% of the forecast 2018 cash flow of $4.50 a unit. Buckeye Partners is still a buy for long-term gains. gains…