Sometimes, analyzing and coming up with worthwhile high-yield vehicles can take on challenges similar to whack-a-mole. Earnings are growing really well, management keeps raising the distributions, new assets are coming onboard...but wait a minute, what about that debt load that just rose by 74%? Will the company's new assets be able to cover the heavier debt load? The yield is 10.25%, with 1.14X Q1 '18 coverage. Management has raised the quarterly payout 21 straight quarters, and plans to have 10% annual distribution growth through 2019. Q1 '18 had record revenue, net income, EBITDA and DCF.
DKL Logistics Partners LP (DKL) is the "yieldco" arm of Delek US Holdings (DK), its parent/sponsor. Its logistics assets exist mainly to serve DK's petroleum refining assets and transportation services. In this type of arrangement, the parent/sponsor sells/drops down assets to the yieldco LP, which in turn funds these acquisitions via a combination of equity and debt. The yieldco usually has an attractive distribution yield in order to garner support for its publicly traded units. DKL and DK both share the same management, and DK owns 94.6% of the GP interest and a 61.5% interest in the LP's common units.
Source: Seeking Alpha
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