Delek Logistics Partners Stock: 11.3% Ultra-High-Yielder Reports Record Q3
January 6, 2025
47 Straight Quarters of Rising Dividends
With market capitalization of $2.0 billion, Delek Logistics Partners LP (NYSE:DKL) is on the upper end of being a small-cap stock. But it might graduate to mid-cap in the near term.
The partnership continues to grow revenue, deliver strong profits, and generate free cash flow (FCF). Thanks to that reliable FCF, Delek Logistics has also been able to grow its dividend for 47 consecutive quarters.
Delek is a midstream, energy master limited partnership (MLP) that owns, operates, acquires, and constructs crude oil and refined products logistics and marketing assets. The assets are company-owned and via joint ventures.
The partnership operates through four major business segments: Gathering & Processing, Wholesale Marketing and Terminalling, Storage & Transportation, and Pipeline Joint Ventures.
Delek’s key areas of operations revolve around the Permian Basin, the Delaware Basin, and other regions in the Gulf Coast area. This includes Texas, Tennessee, Arkansas, and Oklahoma. (Source: “Investor Update,” Delek Logistics Partners LP, August 6, 2024.)
Another Quarter of Record Results
At the time of writing, Delek Logistics was continuing to have a great year. It reported strong first-quarter results and record second- and third-quarter results. (Source: “Delek Logistics Reports Record Third Quarter 2024 Results,” Delek Logistics Partners LP, August 6, 2024.)
For the third quarter ended September 30, 2024, Delek Logistics reported net income of $33.7 million, or $0.71 per share, versus $34.8 million, or $0.80 per share, in the same period last year. The 2024 third-quarter results included $8.7 million in transaction costs and the impacts of sales-type lease accounting.
Net cash provided in operating activities was $24.9 million, compared to $46.8 million in the third quarter of 2023. Distributable cash flow as adjusted was $62.0 million in the third quarter of 2024, compared to $61.4 million in the third quarter of 2023.
Third-quarter earnings before interest, taxes, depreciation, and amortization (EBITDA) in 2024 were $69.2 million, compared to $98.2 million in the third quarter of 2023. The company’s 2024 third-quarter adjusted EBITDA were up 8.7% at $106.8 million, compared to $98.2 million in the third quarter of 2023.
During the third quarter, Delek Logistics closed on its acquisition of H2O Midstream, the largest pure-play water midstream company in the Permian Basin, with more than 250 miles of pipeline.
The MLP also acquired an interest in the Wink to Webster (W2W) pipeline from its parent company, Delek US Holdings, Inc. W2W is a 642-mile oil pipeline that extends from the Permian Basin to the Houston Ship Channel, with over one million barrels per day of capacity.
The partnership didn’t provide any guidance, but Wall Street analysts expect its full-year earnings to grow from $3.23 per share in 2023 to $3.57 per share in 2024 and rise to $4.42 per share in 2025. (Source: “Delek Logistics Partners, LP (DKL),” Yahoo! Finance, last accessed December 11, 2024.)
Delek Logistics Partners Stock: 47th Consecutive Increase in Quarterly Dividend
Thanks to the company’s strong cash flow, which has increased in three of the last four years, Delek Logistics Partners stock is able to provide investors with a reliably growing quarterly dividend.
In 2023, the MLP reported FCF of $124.9 million, while it has already surpassed that level over the trailing 12 months with FCF of $147.23 million. FCF is important, because it helps fund dividends and pay down debt. (Source: “Delek Logistics Partners, LP (DKL),” Yahoo! Finance, last accessed December 11, 2024.)
This past October, Delek’s board approved the 47th consecutive increase in Delek Logistics Partners stock’s quarterly dividend to $1.10 per unit, or $4.40 per share on an annualized basis, for a forward yield of 11.34%. (Source: “Delek Logistics Partners, LP Increases Quarterly Cash Distribution to $1.10 per Common Limited Partner Unit,” Delek Logistics Partners LP, October 29, 2024.)
Dividend hogs can look forward to more of the same with Delek Logistics Partners stock. In prepared remarks about Delek’s third-quarter results, Avigal Soreq, president of the company’s general partner, said, “Delek Logistics continues to provide the best combination of yield and growth in the midstream sector . We are proud of the 47th consecutive increase in our distribution and we expect to continue to increase our distribution in the future.”
In addition to a growing dividend, Delek Logistics Partners stock has great potential. As of the time of writing (December 11, 2024), the stock is up 0.05% year to date and down 10.87% on an annual basis. On the plus side, Delek Logistics Partners stock is up 5.22% over the last six months.
And the outlook remains bright.
Conservative Wall Street analysts believe that Delek Logistics Partners stock could rally 28% over the next 12 months to a high of $50.00 per share; that would put DKL stock at its highest levels since June 2023.
Should Delek Logistics Partners stock hit that level, this would put it in reach of its February 2022 record high of $52.06 per share.
Chart courtesy of StockCharts.com
The Lowdown on Delek Logistics Partners Stock
There are a lot of reasons to like Delek Logistics Partners stock. Delek is a financially robust oil-and-gas play reporting record financial results and expanding its operations. Delek Logistics Partners stock has raised its dividend for 47 consecutive quarters, with management expecting that it will continue to up its payout going forward.
The MLP actually targets a five-percent increase in annual distribution. Judging by Delek’s record results and strong FCF generation, 2025 could be another year of strong share price gains and inflation-thumping dividend growth.
