HFC - Holly Energy Partners: A Long-Term Holding That Could Result In An 11% Yield
- Holly Energy Partners L.P. has demonstrated resilience in 2020 despite a turbulent year in the midstream industry thanks to the minimum volume commitments.
- Distributions were slashed by 48% from pre-pandemic levels, but still represents a fair yield of approximately 7%.
- Based on management’s sentiments, the lower distributions are likely going to stay until the leverage ratio target of 3.0x to 3.5x and coverage ratio target of 1.3x are met.
- We believe HEP's strategy to reduce leverage and enhance coverage is a prudent move that will support greater growth and distribution security when global oil demand recovers.
- Our forecasts predict the targets will be met by FY 2022 with sufficient coverage to support a distribution yield of up to 11% based on the current share price.
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Holly Energy Partners: A Long-Term Holding That Could Result In An 11% Yield