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Strategies & Market Trends : Value Investing
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To: E_K_S who wrote (38674)8/3/2010 11:53:57 AM
From: MCsweet   of 78870
 
EKS,

I think Spekulatius provides a good answer for evaluating MLPs, so basically I would go with that. Here are a few more comments, though.

I'd say distributable cash flow (Price versus disbtributable cash flow or distributable cash flow yield) is the primary factor most analysts use for evaluating MLPs. To the extent this is correctly reflected in dividend yield (which I don't think it necessarily is), then dividend yield is an approximate measure when comparing across MLPs.

EV/EBIDTA seems reasonable for comparison of MLPs versus regular companies. I would think MLPs in general should trade at a premium because of their tax advantage. That is why it is economic for companies to spin-off assets to MLPs and both sides seem to do ok.

You probably also want to factor in the potential growth in cash flow (organic growth good) and volatility of underlying assets (pipelines lower volatility and hence better than production unless you are a big energy bull).

MC
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