MPLX (MPLX 0.75%) has been an exceptional income investment over the years. The master limited partnership (MLP) has increased its distribution every year since its formation in 2012. The energy midstream giant currently offers a 7.4% yield, which is several times above the S&P 500's 1.1% dividend yield.
The energy company has a strong financial profile and lots of growth coming down the pipeline. As a result, you can buy the MLP (which sends a Schedule K-1 Federal tax form each year) for a decade of income.
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Built to generate durable income
MPLX operates a diversified energy midstream platform. The company's pipelines, processing plants, storage terminals, and other assets generate very stable cash flows, supported by government-regulated rate structures and long-term contracts with high-quality customers, including its parent, Marathon Petroleum. These financial frameworks provide the company with significant visibility into its future cash flows.
The pipeline company generated enough cash to cover its high-yielding distribution by a comfortable 1.4 times last year. That enabled it to retain money to fund expansion projects. MPLX also ended the year with a strong balance sheet. Its 3.7 times leverage ratio was below the four times range that its stable cash flows can support.
NYSE: MPLX
Key Data Points
Lots more growth ahead
MPLX's strong financial profile enables it to invest heavily to continue expanding its platform. Last year, it invested $5.5 billion into growth, including capital projects and acquisitions (led by the $2.4 billion Northwind Midstream deal). The MLP plans to invest another $2.4 billion into growth capital projects this year.
It has a long list of expansion projects underway. It's part of several joint ventures building new gas pipelines that should enter commercial service through 2029. It's also in a joint venture building a Gulf Coast LPG export terminal that should start-up in 2028. Additionally, the MLP is building two Gulf Coast NGL fractionation facilities for Marathon Petroleum that it expects to complete in 2028 and 2029. These and other expansions give the company lots of visibility into its growth. MPLX also routinely approves new expansion projects and makes strategic acquisitions. It has ample financial flexibility to continue pursuing additional growth investments to enhance and extend the visibility of its growth profile.
The MLP aims to grow its earnings at a mid-single-digit annual rate. That visible growth should support continued distribution increases.
A bankable income investment
MPLX generates durable cash flows to support its high-yielding payout and growth initiatives. Those investments are growing the MLP's cash flow, giving it the fuel to continue increasing its distribution. Add in its rock-solid financial profile, and MPLX is an ideal high-yielding investment to buy and hold for a decade of reliable passive income.
