MPLX’s distribution growth
MPLX (MPLX) has shown consistent distribution growth over the last several years. Since its IPO in 2012, MPLX has increased distributions for 22 consecutive quarters. MPLX’s coverage ratio has remained well above one over the last several years. The company intends to maintain a coverage ratio of 1.2x or higher while growing distributions 10% for 2018. Currently, MPLX is trading at an attractive yield of 6.6%.
The above graph compares the dividend per share for the last three years for the four midstream companies that we’re discussing in this series—Enterprise Products Partners (EPD), Kinder Morgan (KMI), Williams Companies (WMB), and MPLX.
As the above graph shows, Enterprise Products Partners and MPLX’s distributions have been on an upward trend during this period. However, MPLX’s distributions grew faster. Enterprise Products Partners is also trading at an attractive yield of ~5.9%.
MPLX’s healthy coverage ratio and attractive distribution growth prospects make its yield attractive.
Kinder Morgan and Williams Companies
Kinder Morgan slashed its dividend per share in 2015, while Williams Companies slashed its dividends in 2016. Currently, Kinder Morgan and Williams Companies trade at a yield of ~4.5%. Due to their C corporation structure, Kinder Morgan and Williams Companies might appeal to a broader investor base.
Income investors might find Enterprise Products Partner and MPLX more attractive from a yield perspective. Both of the companies are structured as MLPs. The companies might keep some investors away due to the additional efforts required to file tax returns.
Next, we’ll discuss the four companies’ current valuations.