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Magellan (MMP) Rewards Unitholders With Distribution Hike

Zacks Equity Research

Magellan Midstream Partners, L.P.’s MMP board of directors recently announced an increase in quarterly cash distribution for the fourth quarter of 2018. It has increased the distribution to 99.75 cents per unit from 97.75 cents in the third quarter, representing an increase of 2% sequentially and 8% year over year.

Following the hike, the partnership’s new annualized distribution amounts to $3.99 per unit, up from $3.91 distributed earlier. This revised distribution is likely to be paid on Feb 14, 2019, to unitholders of record on Feb 7.

Should You Take Advantage of the Hikes?

Magellan’s recent hike in distribution is in sync with its stated commitment of raising the annual payout by 8% in 2018. To be precise, the partnership declared an annual distribution of $3.87 per unit in 2018 compared with $3.5875 in 2017. It has a proven history of distribution growth, with 67 quarterly increases since its IPO. Magellan has maintained an attractive distribution growth rate over the past seven years as shown below.

 

 

Moreover, the partnership has plans to keep this distribution growth intact going forward. This move will help it to further boost shareholder value. Its ability to generate significantly high cash from operations can support this plan. Notably, in the first nine months of 2019, the partnership generated $807.3 million in distributable cash flow (DCF), reflecting a 13.2% year-over-year rise.

Also, Magellan expects to witness 5-8% growth in its DCF in 2019 and 2020. This can be supported by its chain of expansion developments. The partnership’s growing and robust portfolio of organic projects such as the Permian Gulf Coast Pipeline, Longhorn and others should also support its growth prospects.

Price Performance

Units of Magellan Midstream have lost 18.7% in the past year compared with 15.2% decline of the industry it belongs to.

Zacks Rank and Stocks to Consider

Currently, Magellan Midstream has a Zacks Rank #3 (Hold). Investors interested in the energy sector can opt for some better-ranked stocks as given below.

Houston, TX-based Shell Midstream Partners, L.P. SHLX is a midstream energy company. For 2019, its bottom line, which has witnessed three upside revisions over the past 60 days, is expected to grow 27.7% year over year. The company currently holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Dallas, TX-based EnLink Midstream Partners, LP ENLK is a midstream energy service provider. The partnership delivered average positive earnings surprise of more than 16% in the trailing four quarters. For full-year 2019, its revenues are expected to rise 17.9% from a year ago. The stock currently has a Zacks Rank #2.

YPF Sociedad Anonima YPF is a Buenos Aires, Argentina-based integrated energy company. Its bottom line for 2018 is expected to increase more than 27% year over year. The company currently has a Zacks Rank #2.

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