Dominion Energy Midstream Hikes Quarterly Distribution By 5%

The general partners of Dominion Energy Midstream LP (NYSE:D) have approved a 5% hike in the quarterly cash distribution rate for unit-holders. The partnership announced a new rate of 28.80 cents per unit to be paid on Aug 15, 2017, to unit-holders of record as of Aug 4, 2017. The hike corresponds to an annualized distribution rate of $1.152 per unit.

Dominion Energy Midstream has been increasing distributions ever since its inception. With the latest distribution, the partnership has hiked the quarterly rate in nine straight quarters since its first distribution declaration in the first quarter of 2015.

The new rate reflects 5% growth over the quarterly distribution of 27.40 cents per unit paid in May 2017 and 22.3% growth from 23.55 cents per unit paid in Aug 2016.

The partnership is working to strengthen its operations and create sources of funds by utilizing the assets it acquires from Dominion Energy Inc. (NYSE:D) through dedicated dropdowns. In addition, the partnership controls businesses that have long-term contracts, which create a base for strong cash flows.

Apart from dropdowns, Dominion Energy Midstream also entered into a strategic acquisition deal to expand its operation. In Sep 2015, the partnership acquired 25.93% interest in Iroquois Gas Transmission System from National Grid (LON:NG) plc (NYSE:NGG) and New Jersey Resources Corporation (NYSE:NJR) . The acquisition of interest is expected to contribute about $20 million annually in cash flows to the partnership.

The demand for midstream services has increased rapidly due to strong production from the U.S. shale assets. Dominion Energy Midstream serves regions which are presently seeing a lot of drilling.

These positive developments will help the partnership to meet its targeted distribution of an average compounded annual growth rate of 22% for its cash distributions from 2015 through the end of the decade.

Dominion Energy Midstream currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Price Movement

Units of Dominion Energy Midstream have returned 4.6% compared with the industry’s gain of 3.7% over the last 12 months.

The partnership’s long-term contracts and return from acquired assets will help it to churn out strong performances.

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