Buckeye Partners L.P. $37 – New York symbol BPL

BUCKEYE PARTNERS L.P. $37 (New York symbol BPL; Income Portfolio, Utilities sector; Units outstanding: 48.4 million; Market cap: $1.8 billion; Price-to-sales ratio: 0.9; WSSF Rating: Average) operates over 8,700 kilometres of pipelines that pump gasoline, jet fuel and other petroleum products. In 2008, Buckeye’s earnings rose 17.9%, to $183.2 million from $155.4 million in 2007, largely as a result of acquisitions, including a natural gas storage facility in northern California. It issued new units to help pay for these purchases. Consequently, earnings per unit grew just 3.3%, to $3.13 from $3.03. Revenue rose 265.2%, to $1.9 billion from $519.3 billion. The slowing economy has hurt fuel demand in the past few months. However, higher pipeline rates have helped Buckeye offset the lower volume. This let Buckeye raise its quarterly distribution by 1.4%. The new annual rate of $3.55 yields 9.6%. Distributions consume nearly all of Buckeye’s cash flow. However, the partnership feels it will generate enough cash flow in 2009 to fund its expansion plans without having to add to its $1.5- billion debt, which is 83% of its market cap, or issue new units. It also holds cash of $59 million, or $1.22 a unit, and has $300 million in untapped credit lines. Buckeye’s units trade at 11.3 times its projected 2009 earnings of $3.27 a unit. Buckeye Partners is a buy.