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Why Magellan Midstream Partners Continues to Attract Investors

PART:
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Part 3
Why Magellan Midstream Partners Continues to Attract Investors PART 3 OF 8

MMP’s Fee-Based Businesses Contribute to Its Stable Cash Flow

Fee-based activities

Fee-based activities contribute to nearly 88% of Magellan Midstream Partners’ (MMP) operating income. As a result, the company has cash flow stability. Transportation accounts for ~60% of Magellan Midstream Partners’ operating income. Terminal delivery fees, fee-based ancillary services, and contract storage account for ~28% of the company’s operating income.

MMP’s Fee-Based Businesses Contribute to Its Stable Cash Flow

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As the above graph shows, commodity-related activities only contribute 12% to Magellan Midstream Partners’ operating income. Magellan Midstream Partners expects future fee-based and low-risk activities to account for 85% or more of its operating income.

Magellan Midstream Partners’ pipeline and logistics business generates fee-based revenues. Also, its FERC-regulated operations provide cash flow stability. A stable cash flow differentiates Magellan Midstream Partners from most of the other MLPs. Stable cash flows contributed to the stock’s outperformance in the past few years.

For a comparative analysis of Magellan Midstream with its peers, read In-Depth Analysis of the Top 4 MLPs: EPD, ETP, WPZ, and MMP.

In the next part, we’ll analyze Magellan Midstream Partners’ distributable cash flows and capital expenditures over the years.

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