MPLX

MPLX LP

29.44
USD
1.52%
29.44
USD
1.52%
26.01 35.49
52 weeks
52 weeks

Mkt Cap 30.19B

Shares Out 1.03B

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This Ultra-High-Yield Energy Stock Has the Fuel to Push Its Dividend Even Higher

MPLX (NYSE: MPLX) currently pays a monster distribution to investors. The energy master limited partnership (MLP) yields 8.6%, which is significantly more than the S&P 500's 1.5% dividend yield. What's becoming increasingly clear is that the company has the fuel to push its payout even higher in the future. That's evident from its first-quarter results and expansion outlook. The big-time payout is on an even firmer foundation MPLX generated $1.21 billion of distributable cash flow in the first quarter. That's a 6.4% improvement from the year-ago period. It was also enough money to cover its high-yield dividend by a comfortable 1.65 times. That metric has improved from 1.56 in the year-ago period. Distribution coverage is 5.8% higher, even though the MLP has increased its distribution by 2.5% over the past year. A major factor in the improvement on a per-unit basis is its repurchase program, which has steadily reduced its outstanding units. MPLX generated enough cash to fund its distribution and capital projects, with $92 million left over. That allowed it to repurchase 100 million units during the quarter. Meanwhile, its steadily rising earnings and fully funded capital allocation program have helped lower its leverage ratio from 3.9 to 3.7 over the past year. These improving financial metrics suggest the company's distribution is growing more sustainable by the quarter. More income growth upside MPLX CEO Michael Hennigan commented on what he sees ahead for the company in the first-quarter earnings release. He stated: "We are advancing several organic growth projects focused on expansions and de-bottlenecking. These actions will continue to support the growth of MPLX, allowing our business to generate free cash flow and return capital to unitholders." The energy company has two expansion projects nearing completion. It expects to finish the Tornado-2 natural gas processing plant in the Delaware Basin in the second half of the year. Meanwhile, the Smithburg de-ethanizer in the Marcellus shale should also come online in the back half of this year. MPLX also continues to add crude oil gathering infrastructure in the Permian Basin and Bakken regions. In addition, it's expanding its crude and natural gas long-haul pipelines in those regions. The company and its partners recently reached a final investment decision to expand the Whistler Pipeline. The project will increase its natural gas capacity from 2 billion cubic feet per day (Bcf/d) to 2.5 Bcf/d, with a projected in-service date of September 2023. As these projects come online, they'll provide the company with more cash that it can distribute to investors. That has certainly been the case in the past year. MPLX returned over $850 million to investors in the first quarter through a higher distribution and its unit repurchase program. Meanwhile, the MLP paid a special distribution of $0.575 per unit in the fourth quarter, bringing its total payment to $1.28 per unit. The company could use its growing future cash flows to continue increasing its base distribution while returning incremental cash via additional repurchases and special distributions. An attractive option for income investors MPLX continues to generate a growing stream of steady cash flow. That's giving it the funds to pay a higher distribution and invest in expanding its operations with room to spare. The MLP's high-yielding distribution should continue growing in the future, making it an attractive option for income-seeking investors. 10 stocks we like better than MPLX LP When our award-winning analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.* They just revealed what they believe are the ten best stocks for investors to buy right now... and MPLX LP wasn't one of them! That's right -- they think these 10 stocks are even better buys. *Stock Advisor returns as of April 7, 2022 Matthew DiLallo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

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