Magellan Midstream Partners (MMP) operates a rather boring business as it ships refined petroleum products like gasoline and diesel around the country's mid-section via its pipeline system. However, while the business might be a yawner, its profitability certainly isn't since the company gets paid fees as those volumes flow through its network, enabling it to haul in more than $1 billion in cold, hard cash last year.

Magellan, as it has done throughout its history, sent the bulk of that money back to investors via dividends, paying them more each quarter and recently boosting the payout for the 67th time since its initial public offering (IPO) in 2001. That growing income stream has richly rewarded investors who have earned a market-pulverizing total return of nearly 2,700% over that time frame, light-years ahead of the S&P 500's 178% total return.

Magellan Midstream hopes to continue its winning ways in the coming years as it expands its pipelines and related infrastructure, which should enable the company to keep growing cash flow and its distribution to investors. That makes it a stock investors won't want to miss.

Check out the latest Magellan Midstream Partners earnings call transcript.

Stacks of coins behind a line of seedings in the dirt; both are getting taller.

Image source: Getty Images.

Growing the right way

Magellan Midstream Partners' recent distribution increase put its payout 8% higher than where it was to start in 2018, pushing the yield up to 6.5%. That's a continuation of a long-term trend from the company as it has not only boosted its payout in 67 quarters since its IPO, but has grown it at a 12% compound annual rate overall.

What's impressive about the company is that it hasn't made any flashy acquisitions to fuel growth. Instead, it has targeted smaller deals that extend its current platform as well as organic expansion projects. Further, it has financed nearly all of its growth over the past decade with a combination of internally generated cash flow and incremental debt, though it has been careful not to stretch itself too thin. That's enabled Magellan to maintain the strongest financial profile in its peer group. While this more conservative approach meant it wasn't able to grow as fast as some peers, the company also avoided the financial meltdowns that have plagued the energy industry in recent years.

More growth up ahead

Magellan Midstream Partners expects to continue increasing the cash it sends to investors over the next few years. The company invested $800 million into growth projects last year and is on track to spend another $1.3 billion this year and a further $400 million in 2020. Those expansions should continue boosting Magellan's cash flow, which should enable it to keep expanding its distribution to investors each quarter. In the company's view, it should be able to increase it at a 5% to 8% annual rate over the next two years while maintaining a strong financial profile.

Meanwhile, the company has more than $500 million of additional expansions in development, which could give it the fuel to continue growing its payout at a healthy rate beyond 2020. For example, Magellan and refining giant Valero Energy (VLO -0.05%) are investing more than $800 million into building a new marine terminal in Texas, which will enable them to export refined products to the global market.

Valero and Magellan should finish the first phase this month and the second by this time next year. However, Magellan has enough space at that location to double the size of the facility in the future, which alone represents a $700 million investment opportunity. In addition to that, it could expand another marine terminal in Texas as well as several of its refined products and oil pipelines. With no shortage of growth opportunities, Magellan should be able to continue expanding cash flow and its payout for years to come. 

An income stock for the long haul

Magellan Midstream Partners might not be a flashy company, but that hasn't stopped it from delivering exciting returns over the years. That trend appears poised to continue in the future because the company has the growth coming down the pipeline to fuel a steady stream of raises each quarter. That's why investors will want to take a closer look at this boring company since the returns in the coming years could be quite thrilling.