Sunoco: Racing to Profits

05/10/2019 5:00 am EST


Bryan Perry

Editor, Cash Machine, Premium Income, Quick Income Trader, Instant Income Trader

Sunoco L.P. (SUN) is a trusted American brand built on innovation and quality; this superbly managed enterprise is well-recognized among racing enthusiasts worldwide, asserts Bryan Perry, growth and income expert and editor of Cash Machine.

The company is the world’s largest manufacturer and marketer of racing fuels, distributing gasoline to more than 500 racetracks worldwide. It is the official fuel of NASCAR, NHRA, INDYCAR and 50 other racing series in the United States.

The company’s footprint is dense within the entire East Coast from Maine to Florida. Sunoco LP, together with its subsidiaries, engages in the distribution and retailing of motor fuels in the United States.

The firm purchases motor fuel from independent refiners and major oil companies, then supplies it to independently operated dealer stations, distributors and other consumers of motor fuel, and partnership operated stations, as well as to commission agent locations.

Its retail stores offer motor fuel, merchandise, foodservice and other services that include car washes, lottery, automated teller machines, money orders, prepaid phone cards and wireless services. It also leases and rents real estate properties.

Every service station is highlighted by its APlus convenience stores that provide everything from freshly brewed coffee to all manner of snacks, craft beers and groceries for all classes of travelers.

With any MLP where investors are required to file a K-1 tax return, it’s my view the investment better fall into the “darn well worth it” category.  In this case, I believe SUN is right in the zone of what I require for an asset to be listed in our Aggressive High Yield Portfolio.

The shares yield a time-tested yield of 10.63% as illustrated by the rich history of distribution increases over the past seven years. In the income investing business, this is where the rubber meets the road. Current distribution coverage is 1.32 times.

The partnership is set to see topline revenues grow from $15.53 billion to $16.39 billion in 2019 with earnings forecast to grow by 16.54% for the next five years. Let’s get long in one of America’s premier service station franchises in front of summer driving season.

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