Key Points

MPLX's earnings and cash flow grew at solid rates during the first quarter. The MLP recently secured several new growth-focused investments. It has visible earnings growth ahead through the end of the decade. 10 stocks we like better than MPLX ›

MPLX (NYSE: MPLX) offers investors a big-time income stream. The master limited partnership (MLP) currently has a monster distribution yield of 7.7%. That's several times higher than the S&P 500's dividend yield (less than 1.5%).

The MLP has increased its payment every year since it went public in 2012 and has delivered robust 10.7% compound annual distribution growth since 2021. It has plenty of fuel to continue growing its prodigious payout in the future. That makes it an attractive option for those seeking passive income and are comfortable with the tax complications of investing in MLPs (they send a Schedule K-1 Federal Tax Form each year). Image source: Getty Images.

The growth continues

MPLX recently reported its first-quarter results, which showcased its continued growth. The MLP generated nearly $1.8 billion of adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA), a 7% increase from the prior year. Meanwhile, it produced nearly $1.5 billion of distributable cash flow, a more than 8% increase from the prior year. That was enough cash to cover its lucrative distribution by a comfy 1.5 times.

The MLP used the cash it retained to invest in its continued growth ($601 million of investments in the quarter) and return some additional money to investors (it repurchased $100 million of its units in the quarter). While the company outspent its cash flow during the quarter, it could easily afford to do so thanks to its strong balance sheet. It ended the quarter with a 3.3 times leverage ratio, well below the 4.0 times range its stable cash flows can support.

More growth is coming down the pipeline

MPLX expects to continue growing in the coming years. The MLP recently announced several new growth-focused investments, which will enhance its outlook:

BANGL Pipeline: The company agreed to buy the remaining 55% interest in the BANGL Pipeline that it doesn't already own for $715 million. It expects to close this acquisition in July, giving it full control over the natural gas liquids pipeline.  Traverse Pipeline: MPLX and its partners made a final investment decision to build the Traverse Pipeline. The natural gas pipeline should enter commercial service in 2027.  Matterhorn Express Pipeline: The MLP agreed to increase its stake in the joint venture that owns this pipeline by 5% for $151 million. It will now own 10% of the natural gas pipeline when this investment closes during Q2.  Crude Gathering: MPLX bought crude oil and natural gas gathering systems from Whiptail Midstream for $237 million. The deal will enhance its strategic relationship with its parent company, Marathon Petroleum, by expanding its crude oil value chain.

Story Continues

These new investments added to MPLX's already robust backlog of expansion projects. The company is in the process of expanding the BANGL pipeline's capacity, which it expects to complete in the second half of next year. It's also building the Secretariat and Harmon Creek III natural gas processing plants (Q4 2025 and second half of 2026 in-service dates). Meanwhile, the company and its partners are building the Blackcomb and Rio Bravo natural gas pipelines (with in-service dates in the second half of 2026). It's also building an LPG export terminal and related pipeline with Oneok (2028) and two NGL fractionators supported by Marathon (2028 and 2029 in-service dates).

These projects give the MLP clear visibility into its ability to grow its cash flows through the end of the decade. Given its already strong financial profile, its growing income should give the MLP the fuel to continue increasing its high-yielding payout for the next several years.

A rock-solid option for collecting passive income

MPLX continues to deliver steadily rising earnings and cash flow. That's giving the MLP the funds to pay a rapidly rising cash distribution while also investing in expanding its operations. With visible growth ahead through the end of the decade and a strong financial profile, MPLX is a very bankable option for those seeking a lucrative stream of passive income.

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Matt DiLallo has no position in any of the stocks mentioned. The Motley Fool recommends Oneok. The Motley Fool has a disclosure policy.

This Ultra-High-Yield Dividend Stock Continues to Add Fuel to Grow Its Already Prodigious Passive Income Stream was originally published by The Motley Fool

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