Outlook for MLPs Ahead of April Earnings
Source: Seeking Alpha, Avi Morris (3/4/09)
"The largest new factor affecting financial markets, among many disasters in the credit crisis, has been the actual and proposed macroeconomic government spending programs coming from DC."
There are also increased worries about how the economic slowdown will hurt them. In April, MLPs will announce Q2 earnings, give guidance and set the distributions for Q2. Q1 distributions went well, with only a few reductions. If the recession bites their businesses harder, there may be more cuts in Q2. The desire to conserve cash is affecting more companies this year.
All dividends are suspect and the highest yield securities are considered to have the greatest uncertainty, much more so than in the past. If financial markets keep falling, MLPs could also get dragged down (as seen in the March 2 decline) with other high yield securities. Their long-term prospects remain excellent as the country's desire to build infrastructure for moving oil and gas around the country has not changed. However, bumps in the road immediately ahead will try even the most loyal fans of MLPs.