MPLX LP’s distribution growth
MPLX LP (MPLX) declared a distribution of $0.6075 per common unit for the fourth quarter of 2018. This represents a 3.4% sequential increase and a 16.8% increase over 4Q16. MPLX posted strong coverage of ~1.2x in 4Q17 despite its strong distribution growth.
MPLX is targeting 10.0% annual distribution growth by the end of this year. MPLX would most likely meet its distribution guidance considering its recent dropdowns, strong distribution coverage, and low leverage.
However, a steep decline in commodity prices could weigh on the partnership’s distribution growth plans.
MPLX LP’s distribution yield
Based on the recent distribution, MPLX is trading at an attractive distribution yield of 7.0%. MPLX’s current yield is high compared to the last one-year and five-year averages of 6.4% and 4.4%, respectively. MPLX’s peers ONEOK (OKE) and Targa Resources Corporation (TRGP) are currently trading at 5.4% and 7.8%, respectively.
MPLX’s higher distribution yield compared to its historical averages might indicate a buying opportunity considering its strong distribution growth guidance, significant expansion opportunities, high distribution coverage, and low leverage. MPLX’s higher distribution yield might reflect its relatively higher commodity price exposure through natural gas processing and crude oil logistics businesses.
About 78.9% of analysts rate MPLX LP as a “buy,” and the remaining 21.1% rate it as a “hold.” The partnership has seen two rating updates in 2018. Jefferies and Barclays lowered the partnership to a “hold.”
MPLX is currently trading below the low range ($.0036) of analysts’ target price. Its average target price of $42.20 implies an ~21.0% upside potential from the current price levels.