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This Oil and Gas Partnership Has a Strong 7.8% Yield

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MPLX: An Oil and Gas Partnership With a Strong 7.8% Yield

Marc Lichtenfeld, Chief Income Strategist, The Oxford Club

Marc Lichtenfeld

It's been a while since I last looked at MPLX (NYSE: MPLX). At the time, the stock received a "B" for dividend safety.

The company did not disappoint, as the dividend was not cut. In fact, it grew by 36% over the next three years.

MPLX is a master limited partnership that processes and transports natural gas and oil. It was spun out from Marathon Petroleum in 2012.

The stock pays a quarterly distribution of $0.9565, which comes out to a 7.8% yield. (MLPs pay distributions, not dividends.) It has boosted the distribution every year since it began paying one in 2013. Can it keep that impressive track record intact?

MPLX and many other MLPs use a measure of cash flow called distributable cash flow, or DCF.

Last year, MPLX's DCF totaled $5.7 billion. This year, it's expected to come in at $6 billion. In 2026, DCF is forecast to grow another 6% to $6.4 billion.

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Meanwhile, the company paid out $3.6 billion in distributions in 2024 for a payout ratio of just 63%. In other words, it paid investors 63% of the cash flow it generated. For MLPs, I'm comfortable with any number below 100%, so 63% is very reasonable.

This year, even though the distributions paid are expected to increase, the payout ratio is projected to dip to 60%.

MPLX has always done a good job of paying a generous distribution without spending all of its cash flow.

Chart: MPLX Appears to Be in Good Shape
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Oil and gas companies can be some of the best places to find attractive yields - especially partnerships, because they're required to pay out at least 90% of their income to shareholders.

So... does MPLX make the grade?

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