- Holly Energy Partners recently completed their acquisition of new assets from Sinclair as their parent company merged with the latter.
- Whilst this pushed their outstanding unit count higher, it should also boost their free cash flow and thus see their strong distribution coverage remain.
- It also saw their net debt increase slightly over 20%, but given the circa 20% forecast earnings increase, this should cancel out.
- When these two variables are combined, it sees scope for distribution growth in the coming years once they finish integrating their new assets.
- Since their high 8%+ distribution yield stands to potentially grow into a very high 10%+ yield on current cost, I believe that maintaining my buy rating is appropriate.
For further details see:
Holly Energy Partners: Higher Yield Coming After Sinclair Acquisition, 10%+ Possible