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GasLog Partners LP: Earn a Yield Higher Than 11.3%? Income Investors 2019-08-09 11:26:36 GasLog Partners LP GLOP GLOP stock NYSE:GLOP GasLog Ltd NYSE:GLOG high yield GasLog Partners LP (NYSE:GLOP) offers a jaw-dropping yield of 10.1%. Here's why investors might get paid even more down the road from GasLog stock. GasLog Stock

GasLog Partners LP: Earn a Yield Higher Than 11.3%?

Looking for Ultra-High-Yielding Stocks? Read This

In today’s market, most investors would be thrilled to earn an annual dividend yield of 11.3%.

But with this particular stock, there’s a decent chance that investors will earn an even higher yield on cost going forward.

I’m talking about GasLog Partners LP (NYSE:GLOP), a master limited partnership (MLP) that owns, operates, and acquires liquified natural gas (LNG) carriers. It was created by GasLog Ltd (NYSE:GLOG) in 2014. Today, the partnership’s fleet consists of 15 LNG carriers, with an average carrying capacity of approximately 158,000 cubic meters.

GasLog Partners LP Pays Oversized Distributions

As I mentioned earlier, what we’re looking at here is already one of the highest-yielding stocks on the market. Last month, the board of directors of GasLog Partners declared a quarterly cash distribution of $0.55 per common unit. With GLOP stock trading at $19.54 apiece, that translates to an annual yield of 11.3%.

Of course, we live in an era when companies paying four percent can be labeled as high-yield stocks, meaning a yield in the double-digits simply seems too good to be true.

However, despite being an ultra-high yielder coming from the volatile energy industry, GasLog Partners has a solid business model in place.

You see, the partnership operates most of its vessels under long-term charters. Over the years, it has signed multi-year contracts with industry heavyweights, including Cheniere Energy, Inc. (NYSEAMERICAN:LNG) and a subsidiary of Royal Dutch Shell plc (NYSE:RDS.A). (Source: “GasLog Ltd. Reports Financial Results for the Quarter and the Year Ended December 31, 2018,” GasLog Partners LP, February 14, 2019.)

And like most MLPs, GasLog Partners reports something called “distributable cash flow.” By comparing an MLP’s distributable cash flow to its actual cash distributions paid for a given reporting period, investors can see whether it generated enough cash to cover its payout.

According to its latest earnings report, GasLog Partners generated $29.4 million in distributable cash flow in the second quarter of 2019. Its actual cash distributions, on the other hand, totaled $26.7 million. Therefore, the partnership achieved a distribution coverage ratio of 1.1 times, meaning it generated 10% more cash than what was needed to meet its distribution obligations. (Source: “Gaslog Partners LP Reports Financial Results For The Three-Month Period Ended June 30, 2019 And Declares Cash Distribution,” GlobeNewswire, July 25, 2019.)

And if you adjust for the negative impact on revenue from the scheduled dry-docking of the partnership’s LNG carrier Solaris, you’ll see that GLOP achieved an adjusted distribution coverage ratio of 1.2 times in the second quarter.

Distribution Growth From a Double-Digit Yielder?

What’s more impressive than GasLog Partners’ distribution coverage is its distribution growth.

You see, when investors buy a double-digit yielder these days, they are usually happy if the company manages to maintain its payout. After all, most ultra-high-yielding stocks are not exactly the safest bets.

But at GasLog, the cash payout has actually been increasing. When the partnership was created in 2014, it had a minimum quarterly distribution rate of $0.375 per common unit. Management has raised the cash distribution multiple times after GLOP stock’s initial public offering.

With GasLog Partners’ quarterly distribution rate standing at $0.55 per unit right now, the partnership’s payout has grown by 46.7% since its inception. (Source: “Distributions,” GasLog Partners LP, last accessed July 29, 2019.)

The best part is, this double-digit yielder is not done with its distribution hikes. During an earnings conference call last month, GLOP’s Chief Executive officer Andrew Orekar said, “[We] are reiterating our guidance of 2% to 4% year-on-year distribution growth for 2019.”  (Source: “GasLog Partners LP (GLOP) CEO Andrew Orekar on Q2 2019 Results – Earnings Call Transcript,” Seeking Alpha, July 25, 2019.)

When asked about the partnership’s plans regarding distribution growth going beyond 2019, Orekar said, “I think I’d only say that it feels like a low single-digit distribution growth with proven coverage and a strong balance sheet is a pretty compelling combination of MLP investment characteristics at the moment.” (Source: Ibid.)

Bottom Line on GasLog Partners LP

Add it all up and you’ll see why GasLog Partners LP stands out. The partnership offers a yield higher than the vast majority of stocks in today’s market, and the company has no problem covering its oversized payout.

It also has a solid distribution growth history, which is quite rare among the high-yield energy names. And based on management’s projection, more distribution hikes could be on the way.

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