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Does Magellan Midstream Partners’ 6.5% Yield Look Attractive?


May. 28 2019, Published 10:33 a.m. ET

MMP’s yield

Magellan Midstream Partners (MMP) is trading at a yield of ~6.5% currently. Its yield is ~170 basis points higher than its five-year average yield of ~4.8%. Magellan Midstream stock outperformed its peers during and after the commodity price turmoil in 2014 and 2015. However, it has been underperforming its peers over the last two years. The stock’s fall in the last two years has contributed to the rise in its yield, making the stock seem attractive.

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The above graph shows Magellan Midstream’s yield over five years. As the graph shows, MMP’s yield has been on the rise since the start of 2017. It rose significantly in February 2018, reflecting the fall in the stock price. Though Magellan’s yield has fallen from more than 7% in February this year, it remains attractive currently.

Recent performance

In 2019, Magellan Midstream stock has risen ~9%. In comparison, the Alerian MLP ETF (AMLP) has risen 13%, and the Energy Select Sector SPDR ETF (XLE) has risen 7% over the same timeframe.

Magellan Midstream reported a 23% year-over-year rise in its Q1 2019 DCF (distributable cash flow). The company’s DCF has shown consistent growth over the last several years. The company expects a 3% growth in its DCF in 2019. The lower expected growth has likely contributed to the stock’s recent underperformance. Notably, Magellan Midstream Partners has consistently raised its distributions over the past several years.


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