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MPLX Is Trading at Attractive Yield of 8.5%

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May. 16 2019, Updated 3:12 p.m. ET

MPLX’s yield

With a market capitalization of $24.6 billion, MPLX (MPLX) follows Energy Transfer (ET) as the largest MLP offering a yield above 8.0%. The company has healthy distribution coverage and leverage metrics. MPLX’s acquisition of Andeavor Logistics (ANDX) should enhance its Permian footprint and growth prospects. On May 8, Moody’s upgraded MPLX’s credit rating to Baa2 from Baa3.

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Yield has risen

MPLX’s average yield for the last five years is ~5.6%. MPLX stock has fallen ~20% from its levels in January 2018. The stock’s fall has pushed its yield higher. MPLX is up just 2% so far in 2019, underperforming its midstream peers.

MPLX’s acquisition of Andeavor Logistics is expected to improve its earnings growth and stability, which may be reflected in the stock’s price going forward.

Recommendations for MPLX

Roughly 34% of the analysts surveyed by Reuters covering MPLX rated it as a “strong buy,” and 58% rated it as a “buy.” The remaining 8% of analysts rated it as “hold.” The median price target for MPLX is $39, which implies an upside potential of 26% from its current price.

MPLX’s 14-day relative strength Index is ~38, which is close to being in the oversold zone of below 30. MPLX fell below its 50-day moving average in March. The stock has fallen ~8% since then.

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