MPLX (MPLX 0.68%) is an overlooked income investment. Because of that, investors are missing out on the master limited partnership's (MLP) big-time payout. It currently yields 9.5%, light-years ahead of the S&P 500's 1.5% dividend yield.

That massive distribution is on a very sustainable foundation. Furthermore, the MLP has an excellent track record of increasing its payout. That makes it a compelling option for those seeking to boost their passive income.

Built to generate income

MPLX owns a diversified portfolio of midstream assets. It has a gathering and processing business that supports production in two key oil and gas basins. It also has a logistics and storage segment that transports and stores oil and refined petroleum products. These assets generate relatively predictable cash flow backed by government-regulated rate structures and long-term contracts with high-quality customers, including its parent, refining giant Marathon Petroleum.

The MLP produced nearly $4 billion of distributable cash flow through the first nine months of this year. That was 6% higher than its total during the same period last year.

It distributed $2.4 billion of that cash to investors, giving it a very comfortable distribution coverage ratio of 1.6 times. That allowed it to retain about $1.5 billion in cash to fund expansion projects and maintain a strong balance sheet. It invested $727 million in capital projects through the first nine months of the year.

The remaining funds helped further fortify its balance sheet. MPLX ended the third quarter with $960 million in cash, $2 billion available on its bank credit facility, and $1.5 billion available on an intercompany loan agreement with Marathon. Meanwhile, its leverage ratio was down to 3.4 times, well below the 4.0 times it could support, given the stability of its cash flow. It has ample liquidity and financial flexibility to opportunistically repurchase units and make a value-enhancing acquisition.

The fuel to continue growing

MPLX has several expansion projects under construction that should come online over the next few years. Its logistics and storage segment is expanding its natural gas and natural gas liquids (NGLs) long-haul and crude oil gathering pipelines to support rising production in the Permian and Bakken basins. MPLX and its partners recently finished expanding their Whistler pipeline and are building the associated Agua Dulce Corpus Christi (ADCC) pipeline lateral that should enter service by Q3 of next year. Meanwhile, it's expanding its BANGL joint venture pipeline, which should come online in the first half of 2025.

The company's gathering and processing segment is building several new plants in the Permian and Marcellus basins to support producer demand. Its sixth and seventh processing plants in the Permian should start by the first half of 2024 (Preakness II) and the second half of 2025 (Secretariat). It's also building Hammon Creek II in the Marcellus, which should enter service in the first half of next year. These projects should help continue the steady growth in its cash flow over the next few years.

A slide showing MPLX's steadily rising cash flow.

Image source: MPLX.

The company should be able to keep growing its business in the future. Energy industry consultancy WoodMackenzie expects U.S. natural gas demand to grow by 22% by 2030, driven by the Northeast (Marcellus) and Permian. That should give MPLX more opportunities to expand its infrastructure in those regions.

Meanwhile, the company wants to expand into new lower-carbon energy sectors like hydrogen and carbon capture and sequestration. Two hydrogen hubs under development by Marathon received funding from the Department of Energy, putting them closer to becoming a reality. Marathon would build and operate the hydrogen production facilities, while MPLX could become involved in transporting hydrogen and carbon dioxide related to those facilities. Lower carbon energy solutions could become a major growth driver for MPLX in the future.

The company also has the financial flexibility to make acquisitions. There has been a lot of consolidation in the energy sector over the past year, which will likely continue. MPLX is in an excellent position to acquire assets or merge with another MLP.

These growth drivers should give the MLP the fuel to continue increasing its distribution. It raised its payout by 10% earlier this year. That continued its streak of annual distribution growth, which stretches all the way to 2012 when Marathon formed its affiliated MLP.

A high-octane income stock

MPLX offers a big-time payout. The MLP supports its distribution with a business that produces very steady cash flow and has a fortress-like balance sheet. Because of that, investors can bank on the durability of its payout. Meanwhile, that big-time distribution should continue rising. These factors make it an excellent option for those seeking to generate more investment income.