Tag Archives: utilities

Otter Tail Corporation: Diversifying With Diversification

Otter Tail Corporation is a diversified utility. Its electrical segment supports its dividend payments while its manufacturing and infrastructure segments offer earnings growth potential. Otter Tail has paid a dividend since 1938. From 1975 to 2008, it increased the dividend annually. With the onset of the financial crisis, dividend bumps were put on hold. Otter Tail is positioned to grow earnings from recent investments as well as cap-ex plans in its manufacturing and infrastructure segments. As earnings grow, its share price should naturally increase. Diversification in a portfolio is strongly recommended. With the recent pressure in the oil and gas industry, it’s easy to understand how a single-focused portfolio could be devastated. Of course, allotments to different sectors for the purpose of diversification vary depending on the goal of the portfolio. The utilities sector is typically included to provide a stable income stream. It is not uncommon for a utility company to offer a dividend yield above the market average. With that in mind, many investors aren’t necessarily looking for share price appreciation when they invest in a utility name. After all, the growth potential for a utility company is quite often limited. But, Otter Tail Corporation (NASDAQ: OTTR ) is a different duck – uh, otter – forget it, it’s a different type of utility company. Otter Tail is a diversified utility company operating in four distinct business segments. It produces and distributes electricity to 130,000 customers in Minnesota, North Dakota and South Dakota. In the other three of its four business segments, it provides manufacturing and infrastructure contracting services under the moniker of Varistar. It is exactly this diversification that differentiates Otter Tail from many of its utility competitors. In its latest investor presentation , Otter Tail management explains its strategy: “Strong and stable regulated electric operations provide cash flow to support dividends.” So, in that regard, Otter Tail is much like other electric utility companies. On the other hand, Otter Tail is also striving to grow: “Manufacturing and Infrastructure businesses provide above average earnings growth potential.” This excerpt from the 2013 annual report details well Otter Tail’s strategy: “The Company has lowered its overall risk by investing in rate base growth opportunities in its Electric segment and divesting certain nonelectric operating companies that no longer fit the Company’s portfolio criteria. This strategy has provided a more predictable earnings stream , improved the Company’s credit quality and preserved its ability to fund the dividend . The Company’s goal is to deliver annual growth in earnings per share between four to seven percent over the next several years, using 2012 as the measurement year. The growth is expected to come from the substantial increase in the Company’s regulated utility rate base and from planned increased earnings from existing capacity already in place at the Company’s manufacturing and infrastructure businesses.” (emphasis added) Dividend Support In the electric utility sector, rates are regulated. Rates grow based on capital expenditures. For the next five years, Otter Tail’s rate base growth is already approved. Based on 2013 rates, Otter Tail has either the lowest or next-to-lowest rate base compared to its competitors in the three states where it operates. Its compound annual growth rate for its average rate base is expected to equal just over 10% per year through 2018. This steady income stream, as mentioned above, is how Otter Tail supports its dividend payments. Having paid a dividend since 1938, Otter Tail is also committed to growing its dividend. From 1975 to 2008, Otter Tail bumped its dividend annually. When the financial crisis ensued, it forced Otter Tail to abandon raising dividends. But, it neither eliminated or lessened dividend payouts through the recovery even though its dividend payout exceeded its net income in 2009 , 2010 , 2011 and 2012 . In February 2014, Otter Tail raised its dividend for the first time since 2008. The chart below compares Otter Tail’s net income to dividends paid. (click to enlarge) Compared to other electric utility companies, Otter Tail is a more-than-fair payer. The utilities sector averages a yield of 3.16 with electric utilities averaging 3.35. In the diversified utilities segment of the utilities sector, only one domestic company offers a higher yield than Otter Tail. But, the chart below displays an important consideration when evaluating dividend paying companies – the earnings compared to the dividend rate also known as the payout ratio. The chart shows the higher-yield-payer, Pattern Energy Group (NASDAQ: PEGI ) and Otter Tail’s direct competitors in the three states it serves, MDU Resources Group (NYSE: MDU ), ALLETE (NYSE: ALE ) and Xcel Energy (NYSE: XEL ). (click to enlarge) The next chart compares the same companies in regard to dividend rate, the stock’s 50-day moving average and the resulting dividend yield. (click to enlarge) Between the two charts, Otter Tail’s allure as an income-producing investment becomes clearer. Growth Support In its non-regulated Varistar business, the three segments are Manufacturing, Plastics and Construction. Otter Tail expects increased earnings potential in these segments. The next chart displays the consistency of the regulated electric segment’s annual net income for the past few years compared to the other three segments’ net income. It is clear in this chart how the financial crisis impacted Otter Tail’s bottom line. (click to enlarge) As the excerpt from the 2013 annual report details, some growth will come from “the substantial increase in the Company’s regulated utility rate base.” The chart below displays the rate base projections and a subsequent extrapolated annual EPS projection for the electrical segment. (click to enlarge) The latter part of the 2013 excerpt references “planned increased earnings from existing capacity already in place at the Company’s manufacturing and infrastructure businesses.” In the recovery years following the financial crisis, Otter Tail undertook two distinct paths. It divested itself of business that did not fit its criteria. It also invested in manufacturing and infrastructure capacity. The chart below shows both historical and planned investments in those three segments. (click to enlarge) The return on capitalization has been growing since 2009 as shown in the next chart. (click to enlarge) In the 2014 third quarter earnings call, management commented about the manufacturing and infrastructure segments: “We expect these companies to provide approximately 25% of Otter Tail Corporation’s earnings, while earning a return on invested capital in excess of our weighted average cost of capital.” Understanding Varistar The company’s SEC filings describe the Varistar segments succinctly: “Manufacturing consists of businesses in the following manufacturing activities: contract machining, metal parts stamping and fabrication, and production of material and handling trays, horticultural containers and produce packaging. These businesses have manufacturing facilities in Illinois and Minnesota and sell products primarily in the United States. Plastics consists of businesses producing polyvinyl chloride (PVC) pipe at plants in North Dakota and Arizona. The PVC pipe is sold primarily in the upper Midwest and Southwest regions of the United States. Construction consists of businesses involved in commercial and industrial electric contracting and construction of fiber optic, electric distribution, water, wastewater and HVAC systems primarily in the central United States.” The manufacturing segment of Otter Tail provides custom metalwork services through BTD. BTD has five locations in the midwestern United States. In June 2014, The Fabricator named BTD to the number three spot on its FAB 40 list. The Fabricator is a magazine focused on North America’s metal forming and fabricating industry. The FAB 40 list is sorted by self-reported annual revenue. In October 2013, BTD was honored as Minnesota’s Large Manufacturer of the Year. BTD’s customer list includes industry leaders such as 3M, Caterpillar, Cummins, GE, John Deere, Polaris and many more familiar names. Though somewhat confusing, T.O. Plastics is also an Otter Tail manufacturing company (not a plastics company). It provides thermoformed products and packaging solutions to a host of industries. T.O. Plastics has two strategic locations in the St. Paul/Minneapolis area to serve the many medical device manufacturers headquartered nearby. T.O. Plastics is also food packaging compliant and ISO compliant. Northern Pipe Products is one of Varistar’s two plastics businesses. It is headquartered in Fargo, North Dakota and produces PVC pipe and products. NPP serves many municipal water, rural water, plumbing and irrigation markets in the midwestern United States and Canada. Its products are third party inspected and tested by industry QA agencies. VinylTech also sells PVC pipe. Its pipe is primarily used in sewer and wastewater applications. VinylTech is headquartered in Phoenix, Arizona. Its products are also inspected and tested by third party agencies. In the construction segment, Varistar operates Aevenia in Moorhead, Minnesota and the Foley Company in Kansas City and Nashville. Aevenia provides construction expertise to the energy and electrical construction sector regarding transmission and distribution, substations, fiber optics, underground and urban telecom and power projects. The Foley Company is a specialty contractor to the mechanical and general construction industry. It has over 100 years of experience on projects such as water/wastewater, industrial/power, commercial/healthcare and fabrication. As shown in the chart below, revenues for Varistar returned to pre-crisis levels in 2011. However, the net income level is still lagging. Full-year 2014 net income may finally surpass the 2007 level. The second chart displays the profit margins for the applicable time period and reflects the same recovery trends. (click to enlarge) (click to enlarge) Stepping a level deeper, the profit margins relative to each Varistar segment are displayed comparing 2007 to 2014 year-to-date. As shown, the manufacturing segment is the laggard in regard to margin recovery. (click to enlarge) Varistar’s Outlook Otter Tail recently decided to commit $33 million in capital investment to Varistar’s BTD. At its Detroit Lakes plant, stamping and tooling capabilities will be enhanced. Also, a plant expansion will allow raw materials to be housed in the same facility as production rather than in an offsite warehouse. This will reduce the costs to transport and track raw materials while providing an overall better production flow. This warehouse consolidation and plant expansion will span 2015 and should be operational early in 2016. At the Lakeville plant, paint and assembly services will be initiated. The painting services will eliminate an outsourcing process, which will tighten processes related to logistical tracking and scheduling requirements. Addressing operational efficiencies such as this should help drive profit margins upward as well as provide additional revenue. Otter Tail expects the painting capability to be operational in the first quarter of 2015. In the Plastics segment, Otter Tail is positioned to benefit from the rising global demand for plastic pipe. According to Underground Construction Magazine , the demand for plastic pipe is projected to increase 8.5% annually through 2017. In August 2014, a summary of a recent market research report about the U.S. Plastic and Competitive Pipe Market estimated the industry will grow to $13.6 billion annually by 2018. Plastic pipe has been replacing copper, concrete and steel due to its lower cost, ease of installation, better performance and corrosion resistance. While the demand for HDPE pipe is expected to see the strongest growth percentage through 2018, the demand for PVC pipe is expected to continue to dominate. The domestic commercial construction industry was slow to recover after the financial crisis. The American Institute of Architects reported early in 2014: “With such sustained growth in design activity, continued improvement in construction activity will follow suit. While the residential sector has led the upturn in the ABI, firms specializing in the commercial/industrial sector have reported solid results for most of the past year. Even firms serving the institutional sector have generally been reporting modest levels of growth over the past year.” By its mid-year review , even with weather slowing progress at the beginning of 2014, the AIA found: “But we continue to have an optimistic outlook for the commercial and industrial sectors both for the rest of this year and into 2015.” The Value of Diversification Otter Tail’s diversification strategy has proven fruitful for its shareholders. For the past ten years, shareholder return was a compounded average of 5.6%. Most of this return is the result of the tidy dividend. Remembering the dividend is supported by the earnings from the electrical segment, the chart below displays the EPS by segment and shows the solid footing supporting the dividend. (click to enlarge) Further, comparing the corporate costs to Varistar’s earnings, the chart below displays two factors – the decreasing costs allocated to corporate and the increasing gains from the Varistar segments. The footing for share price appreciation is solidifying. (click to enlarge) Referencing the planned capital expenditures and the steadily increasing return on capital displayed in the charts above, it is reasonable to further expect share price appreciation. When share price appreciation meets a tidy dividend, a shareholder’s return becomes quite intriguing. Additional disclosure: I belong to an investment club that owns shares in OTTR.

Applying Graham’s Stock Selection Criteria To Dow Jones Utilities

Summary Ben Graham’s stock selection criteria are tried and true for the defensive investor. Public utilities, represented by the Dow Jones Utility Average (DJUA), are no longer sound investments for the defensive investor today. Great variations are found among the 15 DJUA components, allowing an enterprising investor to select stocks higher in both quality and quantity than the average. In a previous article , we revisited Benjamin Graham’s stock selection criteria, applied them to the thirty issues in the Dow Jones Industrial Average (DJIA), and found the DJIA unsatisfactory, mostly failing the valuation criteria. Below are Graham’s 7 stock selection criteria for the defensive investor: Quality 1. Adequate Size of the Enterprise . Graham suggested at least $100 million of annual sales for an industrial company, and at least $50 million of assets for a public utility. These 1973 figures can be adjusted for inflation to roughly $500 million of annual sales and $250 million of assets today (2014). Market capitalization, used by many as a proxy for size, confuses market valuation with business fundamentals. While the two are very much correlated, they may widely diverge at times, and paying exorbitant price for a small business is the exact opposite of defensive investing. 2. A Sufficiently Strong Financial Condition . Current ratio should be at least 2:1 for industrial companies; debt to equity should be no more than 2:1 for public utilities. 3. Earnings Stability . Some earnings in each of past ten years. 4. Dividend Record . Uninterrupted payments for at least the past 20 years. 5. Earnings Growth . A minimum of at least one-third in per-share earnings in the past ten years using three year averages at the beginning and the end. Multi-year average earnings smooth out cyclical earning variations and better reflect a company’s true earning potential. This corresponds to 2.9% compound annual growth, a relatively low hurdle. Quantity 6. Moderate Price/Earnings Ratio . Current price should be no more than 15 times average earnings of the past three years. Again, ignore single year earnings. P/E calculated using trailing twelve month earnings or predicted earnings for the next 12 months are unreliable. 7. Moderate Ratio of Price to Assets . Current price should be no more than 1.5 times the book value last reported. Alternatively, the product of P/E and P/B should not exceed 22.5. A stock meeting this alternative criteria may be considered as fulfilling both quantity criteria and admitted for investment. Application of Graham’s Criteria to the DJUA in 2014 We will now turn our attention to the public utilities, specifically the 15 prominent issues in the Dow Jones Utility Average (DJUA), to see how many, if any, meet these stringent criteria for the defensive investor. As a frame of reference, when Graham did his analysis for the DJUA in 1971, he found all fifteen issues meeting the criteria. In his own words: In comparison with prominent industrial companies as represented by the DJIA, [the DJUA] offered almost as good a record of past growth, plus smaller fluctuations in the annual figures–both at a lower price in relation to earnings and assets. Can the same be said regarding the DJUA today? The table below lists the 15 DJUA stocks with the Graham criteria (red means it failed; green means it passed). These data are obtainable from SEC filings here . Stock Ticker Price Assets Debt/equity Earnings stability? Yrs of Uninterrupted Dividends 2002-2004 Avg Earnings 2011-2013 Avg Earnings Earnings Growth Price to Earnings Book value Price to Book (P/E)*(P/B) # Criteria Met Duke Energy DUK 80.62 119656 1.00 Yes 29 0.43 3.55 725.58% 22.71 58.57 1.38 31.26 6 Exelon EXC 35.48 85264 0.95 Yes 34 2.13 2.39 12.21% 14.85 27.45 1.29 19.19 6 Southern SO 47.76 67654 1.19 Yes 32 1.98 2.36 19.19% 20.24 22.07 2.16 43.79 4 American Electric Power AEP 57.83 57925 1.15 Yes 44 0.49 3.22 557.14% 17.96 34.48 1.68 30.12 5 PG&E PCG 51.94 57884 0.93 Yes 10 3.11 1.95 -37.30% 26.64 33.25 1.56 41.61 3 NextEra Energy NEE 101.08 53383 1.54 Yes 31 0.05 4.54 8980.00% 22.26 43.10 2.35 52.22 5 Dominion Resources D 71.79 52279 2.15 Yes 30 3.20 2.69 -15.94% 26.69 19.82 3.62 96.67 3 FirstEnergy FE 37.19 51224 1.70 Yes 16 1.98 1.66 -16.16% 22.40 30.19 1.23 27.60 4 Edison International EIX 63.18 49475 1.14 No 11 2.85 0.70 -75.44% 90.26 32.95 1.92 173.06 2 Consolidated Edison ED 64.14 40667 0.99 Yes 44 2.59 3.68 42.08% 17.43 43.39 1.48 25.76 6 AES AES 12.79 38983 2.76 No 2 (2.23) (0.33) NM NM 6.14 2.08 NM 1 Public Service Enterprise PEG 40.46 34147 0.74 Yes 107 1.09 2.62 140.37% 15.44 23.89 1.69 26.15 5 NiSource NI 39.10 23710 1.62 Yes 28 1.24 1.37 10.48% 28.54 19.04 2.05 58.61 4 CenterPoint Energy CNP 21.71 22048 1.92 No 44 (4.70) 1.62 NM 13.40 10.41 2.09 27.95 4 Amertican Water Works AWK 51.42 15716 1.20 No 6 1.10 1.94 76.36% 26.51 27.44 1.87 49.67 3 DJUA 51334 1.40 Yes 31 19.19% 26.09 1.90 50.26 4 Unfortunately, the DJUA has changed for the worse since 1971. Not even one of the 15 issues meet all 7 criteria today. It is poorer in both quality and quantity compared to 1971, when utility stocks were inviting to the defensive investor. Salient Aspects of the DJUA Today 1. Size is adequate , with all fifteen issues easily surpassing the minimum $250 million of assets stipulated. 2. Financial condition is adequate in the aggregate, with an average debt to equity ratio of 1.4 for the DJUA, and 13 out of 15 issues meeting the criteria of debt to equity less than 2:1. 3. Earning stability is satisfactory in the aggregate , but 4 out of these 15 issues failed this criteria, a worse showing compared to the DJIA, where only 1 out of 30 issues failed. This is both surprising and alarming, suggesting that utilities are no longer as stable or defensive as they once were. 4. Most of the issues have at least 20 year history of uninterrupted dividends , with an average of 31 for the DJUA. Although satisfactory, the dividend history for the DJUA pales compared to the DJIA, which boasts an average of 67 years of uninterrupted dividends. 5. Earnings growth is very poor . The median earnings for the DJUA is only 19% over the past decade, or 1.77% compounded annually, which does not even keep up with inflation. Only 6, or fewer than half, out of 15 issues met the threshold of at least one-third of per-share earnings over ten years. 6. Ratio of price to three-year average earnings was 26.31 for the DJUA today, which is 75% greater than the maximum 15 required. The DJUA today is not only significantly more amply valued compared to its past, but even more overvalued than the DJIA today, which has a ratio of price to three-year average earnings around 20. 7. Ratio of price to net asset value was 1.91 for the DJUA today, which is 27% greater than the maximum 1.5 required. This is significantly more expensive compared to a ratio of 1.21 for the DJUA in 1971, but more favorable compared to the corresponding figure of 4.38 for the DJIA today. That DJIA commands a higher price relative to asset than the DJUA is by no means surprising, since the industrials tend to have more intangible assets such as brand name, patents, franchises, and trade secrets, which we generally do not find in public utilities. Not all 15 DJUA Issues Are Created Equal It is important to note that although none of the 15 DJUA issues met criteria, significant variations in quality and quantity are detected among the issues. Duke Energy, American Electric Power, NextEra Energy, Consolidated Edison, and Public Service Enterprise Group are five high quality issues meeting all five quality criteria, but failing one or both of the quantity criteria. These would be good stocks to buy after a correction. Stock Ticker Price D/E P/E Book value P/B (P/E)*(P/B) ROE Yield Duke Energy DUK 80.62 1.00 22.71 58.57 1.38 31.26 6.06% 3.94% American Electric Power AEP 57.83 1.15 14.96 34.48 1.68 25.09 11.21% 3.67% NextEra Energy NEE 101.08 1.54 22.26 43.10 2.35 52.21 10.54% 2.87% Consolidated Edison ED 64.14 0.99 17.43 43.39 1.48 25.77 8.48% 3.93% Public Service Enterprise PEG 40.46 0.74 15.44 23.89 1.69 26.15 10.97% 3.66% Average 1.08 18.56 40.69 1.71 32.09 9.45% 3.61% Interestingly, despite these five issues possessing better quality than the composite DJUA, they sell at lower prices relative to earnings and assets compared to the DJUA, with P/E only 71% and P/B only 90% of the composite index. Debt to equity is only 1.08, which is only 77% of the DJUA. Enterprising investors do not have to “pay up” for quality in this peculiar case, and can obtain higher quality utility stocks with lower risk at better prices relative to earnings and assets. Return on equity for this group is 9.45%, not bad given the regulatory environment of public utilities. Exelon also stands out, meeting both quantity criteria and 4 out of 5 quality criteria, failing only the earning growth criterion. The enterprising investor may considering buying if he deems the recent low earnings temporary and trusts the company to turn around eventually, while getting paid a 3.5% dividend to wait it out. On the other hand, AES is demonstrably an inferior issue compared to the average DJUA stock. It has significantly higher debt, multiple years of earnings deficits within the past decade, but nevertheless selling at higher price in relation to its net asset value. Edison International and American Water Works are also inferior issues to be avoided for similar reasons. Conclusion As we have seen, utility stocks, as represented by the DJUA, are unattractive investment options for the defensive investor today. Compared to 1971, utility companies have become somewhat more aggressive, but in vain, evidenced by poorer ten year earnings growth. The moat once enjoyed by regulated public utilities appears to have eroded. Despite the poor showing, the market amply values utility stocks today, much more so compared to 1971, and, in terms of price in relation to earnings. even more so than the DJIA today. This overvaluation is likely the result of the multi-decade low interest rate environment we are in today, since public utilities, with their higher dividend yields and generally higher debt on the balance sheet, are more bond-like compared to industrial issues. At the current extremely low levels, interest rate have nowhere to go but up, which will not hurt bonds, as I wrote in a previous article , but also bond-like investments like public utilities. The defensive investor is well advised to avoid the DJUA for now and wait for a more favorable entry point when interest rates revert to the mean.

TransCanada: Sandell Asset Thinks It Can Unlock Value With A Split

Summary Sandell Asset Management has moved up from activist campaigns in the restaurant space to the oil & gas pipeline space. Founder Thomas Sandell is pushing TRP to break itself up and utilize its MLP more. TRP is pushing back, given it might not benefit its Canadian shareholders. But with a below-average dividend yield and the Keystone XL overhang, something needs to be done. Sandell Asset Management is known for its heated battle with Bob Evans (NASDAQ: BOBE ), with its founder, Thomas Sandell, pushing for a split of Bob Evans’ restaurant and processed food business. “One of Sandell’s keys is to get Bob Evans to sell or spin-off the segment that produces products, such as sausages and mashed potatoes for sale in supermarkets. That’s because there are little synergies between that business and the restaurants it operates.” – Marshall Hargrave Well, he’s pushing the “split-up” thesis at another company, one that is quite the opposite. Sandell wants TransCanada (NYSE: TRP ) to spin off its power generation business, while also transferring its U.S. assets into an MLP. Known for the Keystone XL pipeline, TransCanada is much more than that; however, the stalling of the Keystone yet again puts in focus the fact that the company only offers a 3.7% dividend yield, well below its oil/gas infrastructure peers. It needs to generate more value for shareholders – with shares up 37% over the last five years, while the S&P 500 is up 80%. Sandell is just a small TransCanada shareholder. But that hasn’t stopped it from waging a proxy battle in an effort to get the company to reorganize its corporate structure. Sandell puts TransCanada’s fair value at C$75 a share, which is over 40% upside. Sandell Asset Pro Forma Portfolio (Q3’14) (click to enlarge) (Source: stockpucker.com) The Sandell Basics Sandell wants TransCanada to split off its nuclear, coal and other power generation businesses; granted, without those it would likely be afforded a higher multiple, where it would also be a more stable business and not as dependent on commodity prices. Sandell also wants more asset dropdowns to TC Pipelines (NYSE: TCP ) – a U.S. pipeline MLP that TransCanada has a stake in. It already has plans to drop down stakes in natural gas pipelines to TC, but Sandell wants more. TransCanada plans to drop down $1 billion in assets to TC over the interim; Sandell thinks that number should be north of $10 billion. Selling all its U.S. pipelines to the MLP would reduce costs, given the MLP pays no taxes. This isn’t Sandell’s first rodeo with this type of deal; last year, it pushed Spectra Energy (NYSE: SE ) to drop down its U.S. assets to Spectra Energy Partners (NYSE: SEP ). Using MLPs is a way to pass profits to shareholders without having to pay taxes. Many of the other major oil/gas infrastructure companies turned to MLPs years ago; think Williams Companies (NYSE: WMB ). Yet, the big counter-argument from some of TransCanada’s top shareholders, which are Canadian institutions, is that they would not benefit as much from the U.S. MLP tax benefits. Our Thoughts TransCanada’s dividend leaves something to be desired when stacked up against its oil/gas infrastructure peers. However, the pipeline industry is heavily regulated and has some pretty high barriers to entry, and as a result, is fairly stable. The counter-argument to Sandell is that the pipeline projects are highly capital-intensive. Canadian pipeline companies are self-funding most of their large projects, and don’t need equity funding. With that, its cash distribution payouts are subpar to American counterparts. However, by TransCanada dropping more of its assets to the MLP, it would be able to boost its distribution payout to shareholders. That means a higher yield and higher stock price for the company. So there would be initial upside in dropping the assets down, but it wouldn’t be a long-term positive. TransCanada would be forced to undergo equity issuances to fund future pipeline projects. Where We Stand Sandell sees two key catalysts: one being the spin-off, two being MLP dropdowns. The spin-off seems the least likely of the two, but it also creates the least value. If TransCanada does show signs of utilizing its MLP more, it would seem to be a buying opportunity for investors. However, we would caution the move for investors with a long-term horizon, and question the suggested benefits to dropping down more assets to its MLP.