First look at Sunoco Logistics Partners (SXL)

Sunoco Logistics Partners (SXL)

Share price: $36.34

Shares: 103.33 million

Market capitalization: $3.75 billion

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What the company does – Sunoco Logistics Partners was spun off from Sunoco in an IPO in February 2002. It holds a portfolio of pipelines and terminals that connect refineries to retail distribution systems. The firm also buys and sells crude oil to take advantage of market structures, which works best in periods of high commodity-price volatility. As an MLP, Sunoco Logistics avoids taxation at the company level and requires that the firm pay out all of its excess cash to its investors.

Morningstar’s take – By acquiring and building an attractive portfolio of crude oil and refined products pipelines and terminals, Sunoco Logistics Partners (SXL) has generated steady economic returns for the better part of a decade. Although SXL’s track record of impressive growth will likely be more difficult to replicate going forward, we think the master limited partnership’s access to shale plays and a supportive general partner bode well for continued distribution growth for years to come.

DIVIDEND RECORD – Sunoco Logistics Partners has been an impressive dividend grower since 2002.

Dividend: $0.41 per quarter (this amount includes the 3:1 split.  Google Finance is wrong because it doesn’t adjust the $1.24 third quarter dividend down to $0.41 per share)

Dividend yield: 4.5% ($1.64 annual dividend / $36.34 share price.  Although the company has issued guidance that it will increase the dividend by 7% in 2012)

Dividend payout ratio: 89%($1.64/$1.84 average adjusted EPS)

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EARNING POWER – $1.84 per share average adjusted EPS @ 103.33 million shares.

(Earnings adjusted for changes in capitalization and include the 3:1 split in Dec 2011)

EPS

Net income

Shares

Adjusted EPS

2006

$0.95

$90 M

83 M

$0.87

2007

$1.12

$121 M

86 M

$1.17

2008

$2.05

$177 M

87 M

$1.71

2009

$2.16

$198 M

92 M

$1.92

2010

$3.11

$298 M

96 M

$2.88

2011 (est)

$2.52

$256.9 M

103.33 M

$2.48

EPS

    Net income

Shares

Adjusted EPS

2011 Q1

$0.36

$36 M

100 M

$0.35

2011 Q2

$0.80

$80 M

100 M

$0.77

2011 Q3

$0.78

$81 M

104 M

$0.78

2011 Q4 (est)

$0.58

$59.9 M

103.33 M

$0.58

2011 total (est)

$2.52

$256.9 M

103.33 M

$2.48

Six year average adjusted earnings per share is $1.84

Consider contrarian buying below $14.72 (8 times average adjusted EPS)

Consider value buying below $22.08 (12 times average adjusted EPS)

Sunoco Logistics Partners is currently trading at 19.75 times average adjusted EPS.  This is a hair below speculative pricing.

Consider speculative selling above $36.80 (20 times average adjusted EPS)

BALANCE SHEET – Sunoco Logistics Partners has a mediocre balance sheet.

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Book value per share: $10.46 ($1,081 M equity / 103.33 M shares)

Price to book value ratio: 3.47 (under 1.0 is good)

Current ratio: 1.14 (over 2.0 is good)

Quick ratio: 0.93 (over 1.0 is good)

Debt to equity ratio: 1.66 (lower is better)

CONCLUSION – Sunoco Logistics Partners has a decent dividend yield at 4.5% that is relatively safe, but it isn’t a high dividend stock as you might thing if you just looked at the Google Finance stock screener.  The company had an earning power of $1.84 per share @ 103.33 million shares.  Therefore, its current price of $36.34 is almost speculative.  There is nothing outstanding about its balance sheet.  I recommend that you buy this stock for under $22 when it is on sale in the upcoming double dip recession.  The stock has had a huge price increase since the lows of 2008.  The stock spent most of 2009 and 2010 in value territory.  Buy it when it goes back down there.

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DISCLOSURE – I don’t own Sunoco Logistics Partners (SXL).

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Published in: on January 10, 2012 at 2:36 pm  Leave a Comment  

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