Top Picks 2018: MPLX LP (MPLX)
01/15/2018 5:00 am EST
Following a soft year of performance in 2017, I’m upping my exposure to domestic energy infrastructure where there are more favorable tailwinds, both politically and structurally, explains Bryan Perry, editor of Cash Machine.
MPLX LP (MPLX) is a Master Limited Partnership formed out of Marathon Petroleum (MPC), an extremely well-run company engaged in refining, marketing, retailing and transporting petroleum products primarily in the United States. My top conservative pick for 2018, the stock offers a current dividend yield of 6.3%.
Like many oil and gas companies, there are many tax advantages to carving out the most capital intensive infrastructure assets of total operations that provide a home for future acquisitions and properties of the same structure.
MPLX LP owns, operates, develops and acquires midstream energy infrastructure assets. The company engages in the gathering, processing and transportation of natural gas; the gathering, transportation, fractionation, storage and marketing of natural gas liquids; and the gathering, transportation and storage of crude oil and refined petroleum products.
As of September 30, 2017, the company’s assets included approximately 3,500 miles of crude oil and refined product pipelines across nine states.
On October 26, 2017, MPLX reported fourth-quarter net income of $216 million and adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $538 million. The company also reported net cash from operating activities of $494 million and distributable cash flow of $442 million.
The partnership is in the midst of a period of strong distribution growth that should fuel increased income and capital gains. MPLX declared distribution of $0.5875 per common unit, a 4.4% increase over second quarter 2017.
MPLX also delivered 13% distribution growth in 2016 with a full-year coverage ratio of 1.23. The partnership affirmed 2017 distribution growth guidance of 12-15% and forecast a double-digit distribution growth rate for 2018. Energy MLPs lagged in 2017, but will lead in 2018.