You can't forget the past here, even though it isn't a clear indicator of the future. Advertisement ... Sunoco LP SUN Morningstar Rating Rating as of Oct 30, 2020.

It also slashed its maintenance capital budget by one third and planned to cut other operating costs. While Sunoco has lots of financial liquidity at the moment, it has a weak financial profile overall. It also slashed its maintenance capital budget by one third and planned to cut other operating costs. Management reports that debt to adjusted EBITDA was 3.8 times at the end of the first quarter. Case in point: wholesale gasoline distributor Sunoco LP (NYSE:SUN). Sunoco believes it will have a better idea of volumes and margins when it reports its first-quarter results in May. This is an entirely free service. The recent market sell-off has hammered fuel distribution master limited partnership Sunoco (NYSE:SUN). That adds up to an annual yield of around 11.6%. That sub-investment-grade credit rating makes it more expensive and challenging to borrow money during good times and near impossible when markets are in disarray. During a recession, by and large, people tend to spend less on overpriced snacks and sodas. Typically, though, big dividends get cut sooner or later. You can opt-out at anytime. Most of its business is backed by long-term, take or pay contracts for the delivery of gasoline that provides the partnership with a stable revenue stream. Any investor who manages to scoop up one of these rare high yielders, however, can earn serious portfolio income. That sell-off has pushed the yield on its distribution up to an eye-popping level of more than 20%. Through its subsidiaries, Co. is primarily engaged in the distribution of motor fuels to independent dealers, distributors, and other customers and the distribution of motor fuels to end customers at retail sites operated by commission agents. But the current makeup of the partnership came about from the sale of most of its owned gas stations to 7-Eleven in January of 2018. After selling off its retail business, the company has a lot less cash flow on hand to pay unitholders. That arrangement should churn out more predictable income. Nike Inc: Up Double Digits in One Month with More Upside Ahead, COVID-19 Tailwinds Boosting McCormick & Company, Incorporated, Western Midstream Partners LP: This 14.8% Yielder Deserves a Second Chance, PepsiCo, Inc.: PEP Stock Is a Future Dividend King, Ares Capital Corporation: Earn an 11.7% Yield from an “Alternative Bank?”, Brookfield Asset Management Inc: Why This “Boring” Dividend Stock Might Soar 233%, Enviva Partners LP: This 7.5% Yielder Deserves a Look.

But that's the past, the new Sunoco LP is already looking a little different. See you at the top! No credit card required. Here's the case for and against buying the fuel distribution company these days. If its numbers come in weaker than expected, and fuel demand hasn't started to recover, then Sunoco might need to reduce its high-yielding distribution and use that cash to bolster its balance sheet. In previous years, those payments far exceeded the cash flow generated by the business. Sunoco pays an annual dividend of $3.30 per share, with a dividend yield of 12.96%. Check out our privacy policy. This isn't a great backstory for investors concerned about the safety of their income stream. Over the past 12 months, by comparison, Sunoco has cranked out $1.14 of distributable cash flow for every dollar paid in distributions. So far this sounds exactly like the kind of partnership that can support a high yield. Which partly explains the 13% distribution yield. In fact, distribution coverage was below one for a long stretch, too, which is why the distribution hasn't increased since mid-2016. Market data powered by FactSet and Web Financial Group. Still, you can’t call Sunoco stock’s almost-12% yield the safest payout out there. That's a much more manageable number helped along by the repayment of debt following the gas station sale (long-term debt fell by 35% in the first three months of the year). For me, the big question right now is whether or not Sunoco LP is a yield trap... Today Sunoco LP is largely a distributor of gasoline, a business that the partnership projects will account for 70% of gross profit in 2018. All rights reserved. These sources of predictable cash flow help cushion the blow during periods of economic weakness. This is an entirely free service. 3 Consumer Staples Stocks Paying Up to 9.5%, Why This Recession Hasn’t Hurt the Stock Market.

These moves will improve the company's financial flexibility, giving it more cushion to maintain its sky-high payout. With so much change taking place in 2018, it's probably best to err on the side of caution here and waiting for management to prove that it can actually hit those targets on a sustained basis. The company has grown its dividend for the last 1 consecutive years and is increasing its dividend … Which is why Sunoco LP and its incredible 13% distribution yield caught my eye. He tries to invest in good souls. Review SUN dividend yield and history, to decide if SUN is the best investment for you. Sunoco has taken a number of actions to shore up its balance sheet, for starters. Sure, these companies usually come with a few blemishes. The deal leaves a more predictable business, too. Which is why Sunoco LP (NYSE:SUN) and its incredible 13% distribution yield caught my eye. No part of this document may be used or reproduced in any manner or means, including print, electronic, mechanical, or by any information storage and retrieval system whatsoever, without written permission from the copyright holder. Meanwhile, even though the company's leverage ratio is within its 4.5 to 4.75 target range, it's on the high side for an MLP, since the sector typically targets leverage of less than 4.0. He graduated from Liberty University with a degree in Biblical Studies and a Masters of Business Administration. Sunoco LP is still making some portfolio adjustments, including the sale of more gas stations, but the big changes are largely complete.

The partnership is targeting distribution coverage of 1.1 times and debt to adjusted EBITDA of around 4.5 times on an ongoing basis. As an income-focused investor, I'm like a moth to a flame when it comes to big, fat yields. Dividend Reliability A stock’s dividend reliability is determined by a healthy payout ratio that is higher than other stocks. Which isn't a bad thing, noting that retail sales at the convenience stores attached to gas stations can be fairly volatile. Returns as of 11/05/2020. So far it appears to be working. Having gotten into a debt hole once already, investors would be unwise to give Sunoco LP a lot of leeway on the leverage front. The company recently reduced its 2020 growth spending budget by 42% to $75 million. Sunoco LP (SUN) Dividend Safety metrics. Sunoco LP doesn't appear to be a yield trap, but most investors would be better off avoiding the partnership until it proves the new business model can sustain such a large distribution over a much longer period of time.

No credit card required. Add that to the current uncertainty surrounding the extent of the COVID-19 outbreak, and Sunoco might have to cut its payout to improve its financial flexibility. Payout ratio calculation and chart. It's down about 60% from its recent high.

Sunoco (NYSE:SUN) declares $0.645/share quarterly dividend, 7.5% increase from prior dividend of $0.60. But over the past few years, management has engineered a turnaround. Therefore, I would give this stock a second look. For starters, it has junk-rated credit and an elevated leverage ratio of 4.61 times debt-to-EBITDA. And right now, Sunoco pays out a quarterly distribution of almost $0.83 per unit. However, with the COVID-19 outbreak significantly slowing the economy, it's cutting deeply into demand for gasoline, meaning Sunoco probably won't deliver on its guidance of distributing at least 8.4 billion gallons of fuel this year. In the end, there are so many moving parts right now that it's hard to get a good read on Sunoco LP as a business. Over the past few years, the partnership’s rapid expansion left the business mired in debt. Is ONEOK, Inc.’s 12.7% Yield Really Safe? Their biggest move came in January 2018, when management sold the vast majority of their retail fuel locations in a $3.3-billion deal with 7-Eleven Inc. Those efforts have really chipped away at Sunoco’s debt load. Still, you can’t call Sunoco stock’s almost-12% yield the safest payout out there.

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