Oil and gas pipelines are a staple for investors searching for yield, due to their steady cash flows. With the energy sector showing renewed strength, investors can get further exposure to this sector through some high-yielding names.
Top of the list is MPLX (MPLX). The company — formed from a 2012 spinoff from Marathon Petroleum (MPC) — operates out of the Midwest, managing over 10,000 miles of oil and gas pipelines.
While MPLX operates Marathon Petroleum’s midstream assets, the companies are also closely tied together by ownership, with Marathon shareholders owning around 65% of MPLX.
The most striking thing about MPLX is its 8.9% annualized dividend yield. That’s miles above the 1.5% yield of the S&P 500 and almost double the 5% yield offered by a two-year Treasury note.
MPLX remains fully committed to raising distributions, making increases every year since its inception in 2012.
The company even managed to increase its distribution in a pandemic-stricken 2020 that saw profits turn negative and share prices plummet.
Dividend May Be In Line For Another Hike
While unconfirmed, the current 77.5 cent quarterly distribution may be in line for another hike as soon as November — especially as profits and energy prices run hot.
After it reported earnings of $3.75 per share last year, analysts expect EPS to remain constant at $3.76 this year before increasing to $4 in 2024.
With oil prices surging to a 10-month high this week, investors in MPLX are currently in good shape. In addition, as inflation shows some signs of reaccelerating, some exposure to the energy sector is certainly a smart bet.
Nevertheless, the risk of a global recession has not disappeared, and a moderate to severe recession would certainly hit energy prices and put downward pressure on MPLX.
Shares of MPLX are currently above their 200-day moving average while hovering around their 50-day moving average. The stock is forming a flat base with a 35.85 buy point, per MarketSmith pattern recognition.
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