Dominion Midstream (DM) Hikes Quarterly Cash Distribution By 5%

Dominion Midstream Partners, LP (NYSE:D) , announced that its board of directors has approved a 5% hike in its quarterly common unit distribution above the fourth-quarter 2016 distribution.

The Raise

The raised distribution is 27.4 cents per common and subordinated unit and has taken the annualized payout to $1.096 per unit. The distribution is expected to be paid on May 15, 2017 to all the unitholders of record as on May 5, 2017.

The partnership declared the last quarterly distribution on Jan 25, 2017.

The Regular Distribution Hikes

Dominion Midstream has been increasing its cash distribution per unit in every quarter since the declaration of first distribution on Jan 26, 2015. Thanks to the regular hikes in cash distribution, the partnership has raised its distribution from 13.9 cents per unit to the present level.

The raise is a part of the partnership’s long-term growth target of 22% hike in annual cash distribution through the decade from 2015 distribution levels of 85 cents.

Acquisition to Support Distribution

In Dec 2016, Dominion Midstream announced that it expanded the natural gas storage and distribution business through the acquisition of Questar Pipeline from Dominion Resources, Inc. (NYSE:D) . The total value of the deal is $1.725 billion, of which the partnership paid $823 million in cash and issued $167 million of common units and $300 million of convertible preferred units to Dominion. (Read More: Dominion Midstream Acquires Questar Pipeline for $1.8B)

Questar Pipeline dropdown is expected to support Dominion Midstream’s 22% distribution growth until the second half of 2018.

Dominion Midstream’s Financials

For the quarter ended Dec 31, 2016, the partnership posted net income of $36.5 million, which was in line with management's expectation. The financial condition of the partnership is strong enough to accommodate a hike in the distribution increase.

Price Movement

In the six months, Dominion Midstream outperformed the Oil and Gas Pipeline industry. The partnership’s units returned 28.2%, compared with the Zacks Categorized industry’s gain of 0.9%.

The strategic acquisition of Questar Pipeline is expected to further boost the partnership's performance in the upcoming quarters.

Zacks Rank and Stocks to Consider

Dominion Midstream currently carries a Zacks Rank #3 (Hold). A couple of favorably placed players in the same space include Pembina Pipeline Corp. (NYSE:PBA) and Tallgrass Energy Partners, LP (NYSE:TEP) . Both carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Pembina Pipeline’s Zacks Consensus Estimate for 2017 moved up nearly 3.7% to $1.40 per share in the last 60 days.

Tallgrass Energy Partners’ Zacks Consensus Estimate for 2017 moved up nearly 21.2% to $ 3.43 per unit in the last 60 days.

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