Sunoco Logistics (NYSE:SXL)

Sunoco Logistics

Sunoco Logistics Partners is a company formed in 2002 with the mission of acquiring, transporting, storing and selling crude and refined oil. SXL aims to generate growing cash flows, increase its distributions and provide an attractive return to investorsSunoco Logistics' services are organized into three business units: Refined Products Pipelines, Crude Pipelines, and Terminals. 

 Organizational structure

Pipelines Sunoco Logistics

The Refined Products Pipelines entity provides transportation services for gasoline, fuel oil, diesel and kerosene. Crude oil transported in pipelines includes domestic production, as well as Canadian production and other foreign imports. THE terminals consist of 42 active terminals of refined products, the terminal of Netherlands, several other crude oil terminals serving refineries in the Philadelphia area, and a gas terminal near Detroit, Michigan.

Sunoco, Inc and Sunoco Logistics

Sunoco Logistics ne doit pas être confondue avec Sunoco, Inc (NYYE:SUN), un raffineur et distributeur de produits pétroliers et pétrochimiques, avec lequel elle entretien une relation stratégique unique et qui détient 33,1% de dans sa société soeure. Sunoco Inc est l'un des plus grands raffineurs indépendants aux Etats-Unis en termes de capacité. La société est capable de produire 910'000 barils de produit brut raffiné par jour dans ses raffineries situées dans tout les Etats-Unis et de produire de l'essence , du kérosène, du mazout et du diesel. Sunoco Inc est anciennement connue sous le nom de Sun Company Inc (1886-1920 et 1976-1998) et de Sun Oil Co. (1920-1976). Sunoco est l'une des plus grandes sociétés de distribution d'essence aux Etats-Unis, avec l'essence de la marque Sunoco qui est vendue dans plus de 4'700 points de vente. Les revenus de Sunoco provenant de sources multiples, le bénéfice de l'entreprise n'est pas aussi exposé à la volatility des prix du pétrole. La gestion stricte des coûts est l'une des orientations stratégiques de la société. En plus de la fermeture de raffineries et de la vente d'entreprises, la société a réduit son dividende de moitié (ce qui n'est pas le cas par contre pour SXL).

Sunoco Logistics plans to grow organically by increasing the volume of crude oil and refined products transported, building new or expanding existing pipelines, and developing and adding additional storage at exit terminals. The company also plans to pursue accretive acquisitions that are synergistic with its existing asset base or that result from geographic or industry diversification. In addition, Sunoco, Inc. has agreed not to compete with Sunoco Logistics in the areas of pipelines, terminals, and storage as long as it controls the partnership.

Master Limited Partnership (MLP)

Sunoco Logistics is a publicly traded partnership or Master Limited Partnership (MLP). Dans ce cadre, les bénéfices sont attribués directement aux partenaires (l'équivalent des actionnaires), ce qui évite à la société de payer un impôt sur ses revenus. Cela permet un paiement en espèces potentiellement supérieur aux partenaires. Par contre, ces derniers sont bien entendu imposables. D'un point de vue juridique, pour qu'un partenariat soit considéré comme un MLP, la société doit tirer plus de 90% de ses flux de trésorerie de l'real estate, des ressources naturelles et des matières premières.

Dividends & prices

SXL's trailing twelve-month price-to-earnings ratio is just 8.00 and THE performance comes to a generous 6.30% (MLPs traditionally offer large distributions due to their status). The significant increase in earnings per share in recent years is of course not unrelated to this attractive valuation. The average long-term yield is even higher, at 7,61%, with an annual increase of 10,35%. The history of successive distribution increases is not huge (8 years), which is normal given the youth of the company.

There volatility is important, with 23.16%, but poorly correlated with the market, with a beta of only 0.16. Sunoco has performed well in recent years relative to the market. The stock suffered in 2008, but recovered very well and very quickly thereafter.

 

Conclusion

Sunoco Logistics is an interesting stock, with an attractive valuation from both a dividend and earnings perspective. The company benefits from a situation rent (monopolistic position) due to its access to resources, which is typical for MLPs. The only downside: fairly high volatility and the company's youth and dividends, even though the parent company (SUN) has an impressive track record (remember that the latter has cut its distributions in half). For these reasons, we consider that the stock should be kept if it is already in the portfolio, but, always preferring to err on the side of caution, we do not recommend buying this stock for the moment.


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