Plains All-American Pipeline LP (PAA & PAGP) - May 19

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Plains All-American Pipeline LP (PAA & PAGP) - May 19

Post by dan_s »

I have updated my forecast/valuation model for PAA and posted it the EPG website.

PAGP (General Partner of PAA) is a C-Corp. in our High Yield Income Portfolio. They pay identical quarterly dividends that are going to be $0.2675/Qtr ($1.07/year) for the rest of 2023 and then they will go up by $0.15 per year until they reach a DCF coverage ratio of 160%.

Based on my forecast the dividends could as high as $2.75/year before they reach PAA's target DCF coverage ratio.

For Q1 2023 PAA generated over $0.62/unit of DCF and they paid out distributions of just $0.2675/unit.

PAA is on-track to generate close to $2 billion of free cash flow this year (before dividends) and they will pay out dividends of just under $750 million. They have so much free cash flow since several large capex projects were completed in 2020 and 2021. This company is now a "Cash Flow Machine".

PAGP was trading at $14.09 when I posted this. My updated valuation is $18.00.

TipRanks: "In the last 3 months, 5 ranked analysts set 12-month price targets for PAGP. The average price target among the analysts is $16.80. The 5 price targets range from $15 (Barclays_ to $20 (UBS)".

IMO PAGP has an A++ safety rating and future dividend increases should more than keep up with inflation.
Dan Steffens
Energy Prospectus Group
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