High-yielding dividend stocks often have higher risk profiles. With a nearly 8% yield, MPLX (MPLX +0.41%) would seem to be in the higher risk category. However, that couldn't be farther from the truth.
The master limited partnership (MLP) -- an entity that sends a Schedule K-1 Federal Tax Form each year -- has a fortress financial profile. Further, the pipeline company has visible growth secured through 2029. These features mean you can confidently buy and hold this high-yielding dividend stock through at least the end of the decade.
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Another strong year
MPLX recently reported its fourth-quarter and full-year financial results. The MLP generated $5.8 billion of distributable cash flow last year, enough to cover its high-yielding distribution by a comfortable 1.4 times. The MLP produced $1 billion in free cash flow after paying distributions, enabling it to retain cash to fund growth.
The pipeline company invested well in excess of that amount last year as growth investments totaled $5.5 billion. It made several acquisitions, including the $2.4 billion purchase of Northwind Midstream. The MLP also invested capital across several expansion projects.
NYSE: MPLX
Key Data Points
Even with that massive growth investment, the MLP ended the year with a rock-solid financial profile. Its leverage ratio of 3.7 times is well below the 4.0 times range that its stable cash flows can support. The MLP's strong financial profile and growing cash flows enabled it to hike its distribution payment by 12.5% last year.
Ample growth coming down the pipeline
MPLX expects to invest another $2.4 billion into growth capital projects this year. The MLP has a long list of expansions underway. It's building two new NGL fractionators near its parent company's (Marathon Petroleum) Galveston Bay refinery that it expects to complete in 2028 and 2029. It's also building a Gulf Coast LPG export terminal in a strategic partnership with Oneok that should come online in 2028. Additionally, it has investments in several joint ventures building new natural gas pipelines that should enter service in the 2026 through 2029 time frame.
The MLP continues to secure new growth capital projects. It recently approved the construction of the Secretariat II gas processing plant (with an in-service date in the second half of 2028) and the Marcellus Gathering System Expansion (with an in-service date in the first half of 2028). These projects further enhance its growth visibility over the next few years.
A high-octane income stream
With a strong financial profile and visible growth ahead, MPLX should have ample fuel to continue increasing its high-yielding distribution. The MLP expects to deliver mid-single-digit earnings growth going forward, which could support a similar distribution growth rate. This high-yielding and steadily rising income stream makes MPLX an ideal investment to hold through at least the end of the decade.
