MPLX LP Has Hiked Its Dividend for 10 Straight Years
While crude oil prices can be volatile, for the most part, they’ve been range-bound over the last quarter with macroeconomic developments failing to energize oil prices. At the start of 2024, the forecast was for crude to trade above $90.00 per barrel in the back half of the year. That hasn’t materialized; oil is trading below $80.00 per barrel for the first time since February.
That said, the outlook for oil remains robust, with supply growth expected to increase to 102 million barrels per day in 2025. Longer-term, demand for oil will remain strong thanks to green energy.
Why?
Oil- and petroleum-based products are indispensable for global electrification. (Source: “BP predicts global oil demand will peak in 2025, bringing to end rising emissions,” The Guardian, July 10, 2024.)
For the foreseeable future, the world will be relying on oil and gas. Unfortunately, not everyone lives near an oil field. That’s why midstream oil and gas companies like MPLX LP (NYSE:MPLX) are the unsung heroes of the oil patch. They’re the toll bridges of the oil patch, moving oil and gas from the wellhead to refineries. And these companies get paid whether the drillers make money or not.
MPLX is an oil and gas midstream company, formed by oil and gas behemoth Marathon Petroleum Corp (NYSE:MPC). The Findlay-Ohio-based company owns and operates midstream energy infrastructure and logistics assets and provides fuels distribution services. (Source: “Fact Sheet,” MPLX LP, last accessed July 29, 2024.)
Its assets, which are in key U.S. supply basins, include:
- A network of crude oil and refined product pipelines
- An inland marine business
- Storage caverns
- Refinery tanks, docks, loading racks, and associated piping
- Crude and light-product marine terminals
- Crude oil and natural gas gathering systems and pipelines
- Natural gas and natural gas liquid (NGL) processing and fractionation facilities
Solid First-Quarter Results
For the first quarter ended March 31, 2024, MPLX announced that total revenue increased five percent year over year to $2.86 billion. (Source: “MPLX Reports First-Quarter 2024 Financial Results,” MPLX LP, April 30, 2024.)
The company’s first-quarter net income increased 6.6% to $1.01 billion, while adjusted earnings climbed 7.6% to $1.6 billion. Net cash provided by operating activities inched up to $1.29 billion, while distributable cash flow rallied eight percent to $1.37 billion, or $0.85 per unit, with adjusted free cash flow (FCF) of $294.0 million.
Commenting on the results, Michael J. Hennigan, MPLX’s chairman, president, and chief executive officer, said, “We continue to execute our growth strategy anchored in the Marcellus and Permian basins. This growth allows us to reinvest in the business, and for the last two years has supported a 10% increase to the distribution.”
10 Straight Years of Increased Distribution
Strong first-quarter cash flow generation allowed MPLX to return $951.0 million in capital to unitholders. Not only has the company been able to increase its distribution by 10% in each of the last two years, but it has also increased its payout for the last 10 consecutive years. (Source: “Distributions,” MPLX LP, last accessed July 29, 2024.)
In October 2023, MPLX LP increased its quarterly distribution by 10% on an annual basis from $0.775 per unit to $0.85 per unit. It has held it there since then. This translates into an annual distribution of $3.40 per unit, for a yield of 7.9%. (Source: “MLX LP Increases Quarterly Distribution,” MPLX LP, October 24, 2023.)
If history is to repeat itself, MPLX should announce another distribution hike in the third quarter, making it 11 straight years of dividend growth.
MPLX Units Crushing Broader Market
Strong financial results are helping juice MPLX LP units higher. On July 22, MPLX hit a new record intra-day high of $43.42 per unit.
Currently trading near that level, MPLX stock is crushing the broader market, up:
- 18.5% over the last six months
- 22.75% year to date
- 33% year over year
Big gains, but Wall Street thinks MPLX units will hit fresh highs over the company quarters, with analysts providing a 12-month share price target range of $45.78 to $50.00. This points to potential gains in the range of six percent to 13.5%.
Analysts expect MPLX’s revenue to increase from $11.28 billion in 2023 to $11.9 billion in 2024 and $12.31 billion in 2025. The company’s earnings, meanwhile, are projected to grow from $3.80 per share in 2023, to $4.06 per share in 2024, to $4.31 per share in 2025. (Source: “MPLX LP (MLPX),” Yahoo! Finance, last accessed July 29, 2024.)
Chart courtesy of StockCharts.com
The Lowdown on MPLX LP
MPLX LP continues to be a great midstream stock reporting strong FCF growth, which helps support its reliable and growing ultra-high-yield dividend. The company’s outlook remains bright, too, with analysts calling for strong revenue and earnings growth, which should help see MPLX units hit additional new highs.