Endangered Dividends List

Amerigas Partners’ (NYSE: APU) merger terms with general partner UGI Corp (NYSE: UGI) imply a roughly 83 percent cut in the dividend when the deal closes. That eventuality has been known by investors for two weeks and is therefore baked into the price. Therefore, while we do advise moving on from Amerigas, the MLP is now off the Endangered Dividends List.

American Midstream Partners (NYSE: AMID) has received its likely best and final takeover offer from general partner ArcLight Capital Partners LLC. ArcLight last year bid $6.10 per share in cash for AMID units, before cutting it to $4.50 in the wake of disappointing operating results. The newly agreed on offer of $5.25 per unit in cash appears likely to win needed approvals and to close in coming weeks.

There have been no additional dividend cuts in our three coverage universes since the previous EIA issue. That’s largely a function of timing, as companies are winding up the calendar first quarter and won’t be declaring their next distributions until next month.

However, calendar fourth quarter reporting requires considerably more legal filings. That means it typically takes several weeks longer for many companies to compete filings than it does other times of the year. And the good news is several later reporters did come in with encouraging news and guidance.

Summit Midstream Partners LP (NYSE: SMLP) is cutting its quarterly payout in half from 57.5 cents to 28.75 cents. Management called the move a “repositioning” to “fund attractive growth opportunities and maintain a prudent capital structure.” The partnership also swapped its general partner’s IDRs for 8.75 million new common units, boosting outstanding shares by roughly 12 percent.

No companies on either the Endangered Dividends List or within our energy stock coverage universes have announced dividend cuts since the previous issue. That includes Sanchez Midstream Partners (NYSE: SNMP), which maintained its payout this month despite the apparent slide toward bankruptcy of its parent and leading customer Sanchez Energy Corp (NYSE: SN).

This dividend declaration season, five companies announced dividend distribution cuts. All operate in more leveraged sectors of the energy industry. The chief catalyst was the autumn retreat in benchmark oil prices, coupled with some extremely wide differences in regional pricing.

American Midstream Partners (NYSE: AMID) will eliminate its distribution this month. That follows a 75 percent cut announced in July, which was preceded by a more modest 12.7 percent trimming two years earlier.

The immediate catalyst is a restated credit agreement, which based on expected fourth quarter financials would preclude management’s ability to pay a distribution.

Altagas Ltd (TSX: ALA, OTC: ATGFF) cut its monthly dividend to 8 cents Canadian from the previous 18.25 cents, starting with the January 15 payment. We highlight the move as part of a strategic reset by management in the December 13 Alert “Altagas Resets for a Hostile Capital Market.” Kinder Morgan Canada (TSX: KML, OTC: KMLGF) announced its 2019 financial projections, which reflect the now closed sale of the Trans Mountain pipeline system to the Canadian government.

The latest two EDL members to announce dividend reductions are Bonterra Energy (TSX: BNE, OTC: BNEFF) and Sanchez Midstream Partners (NYSE: SNMP).

Canadian oil and gas producer Bonterra is slashing its monthly payout from 10 cents Canadian to just a penny a share. That’s a direct consequence of a decline in its realized selling price for oil to just CAD21.50 per barrel from CAD77.20 since the end of the third quarter.

Buckeye Partners (NYSE: BPL) is cutting its quarterly distribution for the first time in its 30-year plus history, from $1.2625 to 75 cents per unit. That’s a -40.6 percent reduction starting with this month’s payment, an amount right in line with our expectation.