Noble Midstream Partners (NBLX) burst out of the gate, delivering a sector-leading total return of 44% in its first full year as a public company, which was quite a feat considering that most of its peers lost value last year. The master limited partnership's growth was fueled by a string of needle-moving acquisitions that enabled the company to increase its high-yielding payout by 24% over the past year.

That fast start is only the beginning. Noble Midstream has clear line of sight to boost its payout by at least a 20% annual rate through 2022 given the growth coming down its pipeline. It's a forecast that could help those nearing retirement meet their income goals.

A hand putting money from rising coin stacks into a glass jar.

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Doing some simple math

Noble Midstream capped off its exceptional rookie year by recently boosting its distribution by another 4.7%, pushing its annual rate to $1.95 per unit. At the recent market price of around $46.50 apiece, units of Noble Midstream yield about 4.2%. If we take that starting point and multiply it by the company's distribution growth forecast, it yields some compelling future income streams depending on the initial investment.

No. of Shares Purchased ($46.50 Each)

Total Initial Investment

In 2018*

In 2019*

In 2020*

In 2021*

In 2022*

Cumulative Potential Income

































Data sources: Noble Midstream Partners and author's calculations. * = potential income. 

To pull one example from the table, an up-front investment of $11,625 would buy about 250 units. By the end of this year, that investment should generate $585 in annualized income, which could grow to more than $1,200 in five years if Noble Midstream hits its targets. Looking at it another way, this forecast implies that investors can earn a 10.5% yield on their initial investment by the end of 2022.

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The numbers to back up that forecast

While there are investments out there that pay a double-digit yield today, few offer the safety and the upside of Noble Midstream. That's due in part to the fact that the company currently covers its distribution with cash flow by a comfortable 2.4 times, and expects coverage to be more than 1.3 times through 2022. For comparison's sake, two MLPs that currently offer double-digit yields, Enbridge Energy Partners (EEP) and Summit Midstream Partners (SMLP -0.53%), expect to barely generate enough cash flow to cover those payouts this year. Because of that, both are far more likely to reduce their distributions than increase them in the coming years. It's also worth pointing out that Noble Midstream's long-term coverage forecast is more conservative than even top-tier MLPs Magellan Midstream Partners (MMP) and Enterprise Products Partners (EPD 0.34%), which have recently covered theirs by around 1.2 times.

Adding further support to Noble Midstream's forecast is its strong balance sheet, backed by a leverage ratio that should remain less than 2.0 times debt to EBITDA through 2020. Enbridge Energy and Summit Midstream, on the other hand, both have leverage ratios hovering around 4.0 times, while even the most financially conservative MLPs Magellan Midstream and Enterprise Products Partners are comfortable with leverage ratios of around 4.0 times.

These strong financial metrics increase the probability that Noble Midstream will have the financial flexibility needed to invest in its planned expansion projects, which would give it the fuel to grow its payout at a 20% annual rate through 2022. It's also worth noting that the company has ample upside to that plan since it has the financial capacity to acquire additional assets or invest in other expansion projects beyond those already in the backlog.

Set up to deliver an even bigger cash flow stream down the road

Noble Midstream is the type of company that those a few years away from retirement will want to consider. That's because its growth forecast suggests the company will pay a much more lucrative cash flow stream a few years from now when a retiree would need that money. Furthermore, it backs that plan with top-tier financial metrics, increasing the likelihood that it can achieve the promised income growth, which could also help it continue to deliver market-beating total returns.