Sprague Resources cuts distribution by 35%

Sprague still offers a high dividend yield with 9.3%

Sprague Resources LP (SRLP) will lower its quarterly distribution by 35 percent to $0.4338 per share in Q4 of 2021. The Master Limited Partnership (MLP) had last announced a dividend hike in 2019.

Bad news for MLP investors in Sprague Resources, because the quarterly distribution rate to unitholders will be lowered for the first time since a distribution was initiated back in 2014. 

In a press release Sprague explains the dividend cut, saving the MLP approximately $25 million annually in direct cash flow to invest in accretive growth projects while significantly boosting Sprague’s distribution coverage ratio. “We’re seeing a range of attractive opportunities associated with the evolving energy landscape and believe that re-investing additional cash flow from operations offers the best return profile,” stated David Glendon, Sprague’s President & CEO. “This shift in our financial strategy enables the execution of our growth plans while maintaining leverage in our target range of 3.0-4.0x.” 

The lower SRLP distribution will be paid on Wednesday, November 10, 2021 to unitholders of record as of the close of business on November 5, 2021. The new dividend yield for Sprague is 9.3% based on a stock price of $18.65 and a new annual distribution rate of  $1.74 per unit.

Earlier this year several other MLPs announced a distribution cut, including Shell Midstream Partners, with a similar 35 percent cut announced this July.

Sprague Resources LP is engaged in the purchase, storage, distribution and sale of refined petroleum products and natural gas. The company also provides storage and handling services for a broad range of materials. The Company operates through four segments: refined products, which purchases a range of refined products, such as heating oil, diesel fuel, residual fuel oil, asphalt, kerosene, jet fuel and gasoline from refining companies, trading organizations and producers; natural gas, which purchases natural gas from natural gas producers and trading companies, and sells and distributes natural gas to commercial and industrial customers in the Northeast and Mid-Atlantic United States; materials handling, which offloads, stores and prepares for delivery a range of customer-owned products, including asphalt, clay slurry, coal and heavy equipment, and other operations, which include the purchase and distribution of coal, certain commercial trucking activities and the heating equipment service business.