RBC Capital Markets Analyst TJ Schultz says he thinks drop-down stories have highly visible growth that warrants premium valuations despite crude volatility. He says Dominion Midstream Partners LP (DM) is one of his favorite drop-down stories, and a stock for which he’s willing to pay up for the visible growth.
“Dominion Midstream has some of the most explicit and clear distribution growth guidance in the entire MLP space,” Schultz says.
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At its analyst day in February, Dominion Midstream’s management unveiled plans to support a 22% distribution compound annual growth rate through 2020.
“With that, we think the high growth through 2020 will continue to warrant a premium valuation on Dominion Midstream, and it should make it a name that performs well this year if uncertainty persists elsewhere,” Schultz says.
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