This year has been a rough one for stocks, which have been pulled under by a market sell-off that started in late January. While most have lost value this year, energy MLPs have been among the hardest-hit, buckling under the added weight of a rule change and rising interest rates. Among those taking it on the chin is Phillips 66 Partners (NYSE:PSXP), which has declined more than 15% from its peak earlier this year.

That drop, when combined with another 5% increase in its distribution, has pushed its yield up to 5.7%, the highest in the company's history. That looks like an attractive entry point for income-seeking investors, given the growth the company has lined up.

A man holding a lightbulb next to a growing stack of coins

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Stomping on the gas

Phillips 66 Partners is coming off a big year. Earnings catapulted 60% to $754 million, while distributable cash flow leaped more than 50% to $572 million thanks to a string of acquisitions completed in the past year. That rapidly rising cash flow enabled the company to increase its distribution to investors by 22% last year, which it still covered by a comfortable 1.33 times in the fourth quarter.

The company set the stage for that strong showing in late 2016 when it acquired a portfolio of 30 logistics assets from its parent company, refining giant Phillips 66 (NYSE:PSX). The MLP paid $1.3 billion for these assets, which generate about $150 million in annual earnings. Phillips 66 Partners followed that up with an even larger purchase late last year, spending $2.4 billion to buy two more assets from Phillips 66, including its 25% stake in the controversial Bakken Pipeline, which fellow MLP Energy Transfer Partners (NYSE:ETP) finally completed in June. That latest deal will add a needle-moving $270 million to Phillip 66 Partners' bottom line in the next year.

A stack of pipes

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Setting the stage for future growth

That transaction gives Phillips 66 Partners a clear line of sight to hit its target of generating $1.1 billion in annual earnings by the end of this year. It also keeps the company on pace with its ambitious goal to increase its payout at a 30% compound annual growth rate from 2013 through 2018. This forecast suggests Phillips 66 Partners' payout should continue rising at a rapid pace this year, likely by around the same 5% quarterly rate it has increased the distribution by over the past year.

While the company's current five-year plan ends this year, it's worth pointing out that Phillips 66 Partners already has its next phase of growth lined up. However, instead of relying on dropdown transactions with its parent, Phillips 66 Partners will use organic expansion projects as the main fuel for distribution growth. Overall, the company plans to invest $510 million in expansions this year.

One of the notable growth projects is the Bayou Bridge Pipeline, which Energy Transfer Partners is in the process of expanding. Another important one is the Sand Hills Pipeline, which is operated by DCP Midstream (NYSE:DCP), another MLP controlled by Phillips 66. DCP Midstream recently completed one expansion of that natural gas liquids (NGLs) pipeline and had another underway. These growth projects should enter service in the second half of this year.

Phillips 66 Partners also has some projects lined up for 2019 and beyond. One of the largest is a $200 million investment to build a unit at one of Phillips 66's refineries to increase its production of higher-octane gas. The companies expect to finish this project by the end of next year. In addition, DCP Midstream has another expansion of Sand Hills in development, which could enter service in late 2019 if the partners move forward with the project.

These expansion projects should provide Phillips 66 Partners with the fuel to keep growing its payout at a high rate, for at least the next couple of years. Add the potential to continue acquiring midstream assets from Phillips 66 as well as from third parties, and the company has no shortage of growth opportunities ahead.

An excellent income growth stock for a lower price

Phillips 66 Partners has delivered high-octane income growth to investors over the past several years. While it's nearing the end of its current growth plan, the company still has plenty left in the tank to continue pushing its payout higher. What makes that growing income stream all the more compelling these days is that Phillips 66 Partners' valuation has taken a tumble along with the market, pushing its yield up to an even more attractive level for income-seekers.