Analysis of the company's dividend history, yield, growth rates, and future prospects
Magellan Midstream Partners LP(MMP, Financial) recently announced a dividend of $0.25 per share, payable on 2023-09-25, with the ex-dividend date set for 2023-09-20. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's deep dive into Magellan Midstream Partners LPs dividend performance and assess its sustainability.
About Magellan Midstream Partners LP
Magellan Midstream Partners is a master limited partnership that operates pipelines and storage terminals in the Central and Eastern United States. Its assets transport, store, and distribute refined petroleum products and crude and earn a fee-based stream of cash flows. Assets include the country's longest petroleum pipeline network and several crude oil pipelines. Refined products make about 70% of operating margin, with the remainder mainly crude-oil pipelines.
Magellan Midstream Partners LP's Dividend History
Magellan Midstream Partners LP has maintained a consistent dividend payment record since 2001. Dividends are currently distributed on a quarterly basis. Magellan Midstream Partners LP has increased its dividend each year since 2001. The stock is thus listed as a dividend achiever, an honor that is given to companies that have increased their dividend each year for at least the past 22 years.
Magellan Midstream Partners LP's Dividend Yield and Growth
As of today, Magellan Midstream Partners LP currently has a 12-month trailing dividend yield of 6.01% and a 12-month forward dividend yield of 6.01%. This suggests an expectation of same dividend payments over the next 12 months.
Over the past three years, Magellan Midstream Partners LP's annual dividend growth rate was 1.00%. Extended to a five-year horizon, this rate increased to 3.20% per year. And over the past decade, Magellan Midstream Partners LP's annual dividends per share growth rate stands at 8.80%.
Based on Magellan Midstream Partners LP's dividend yield and five-year growth rate, the 5-year yield on cost of Magellan Midstream Partners LP stock as of today is approximately 7.04%.
Is Magellan Midstream Partners LP's Dividend Sustainable?
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-06-30, Magellan Midstream Partners LP's dividend payout ratio is 0.84. This may suggest that the company's dividend may not be sustainable.
Magellan Midstream Partners LP's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks Magellan Midstream Partners LP's profitability 8 out of 10 as of 2023-06-30, suggesting good profitability prospects. The company has reported positive net income for each of year over the past decade, further solidifying its high profitability.
Magellan Midstream Partners LP's Growth Metrics
To ensure the sustainability of dividends, a company must have robust growth metrics. Magellan Midstream Partners LP's growth rank of 8 out of 10 suggests that the company's growth trajectory is good relative to its competitors.
Revenue is the lifeblood of any company, and Magellan Midstream Partners LP's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. Magellan Midstream Partners LP's revenue has increased by approximately 10.30% per year on average, a rate that outperforms than approximately 50.93% of global competitors.
The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, Magellan Midstream Partners LP's earnings increased by approximately -1.70% per year on average, a rate that outperforms than approximately 29.45% of global competitors.
Lastly, the company's 5-year EBITDA growth rate of -2.30%, which outperforms than approximately 25.33% of global competitors.
Conclusion
While Magellan Midstream Partners LP has a consistent dividend payment record and a decent growth rate, the high payout ratio raises questions about the sustainability of its dividends. However, the company's strong profitability and growth metrics provide some reassurance. Investors should continue to monitor these factors closely. As always, it's crucial to consider the overall investment potential and not just the dividend performance.
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