My Top High-Yielding Pipeline Stock to Buy in 2025 for Passive Income
Monday, Jan 20, 2025 5:14 am ET
5min read In the quest for passive income, investors often look to the energy sector, where pipeline stocks offer a unique combination of stability and high yields. One standout company in this space is MPLX LP (MPLX), a master limited partnership (MLP) with a robust business model and a track record of distribution growth. Here's why MPLX is my top high-yielding pipeline stock to buy in 2025 for passive income.
Stable Cash Flow and Diversified Business Model
MPLX's diversified business model generates stable cash flow, backed by government-regulated rate structures and long-term contracts with high-quality customers, including its parent company, Marathon Petroleum. This stable cash flow provides a solid foundation for MPLX's high-yielding distribution and growth potential.
Strong Financial Profile and Growth Prospects
MPLX maintains a fortress-like balance sheet with a low leverage ratio (3.4) and ample cash on hand ($2.4 billion). This strong financial profile allows the company to fund organic expansion projects, acquisitions, and distributions while maintaining its financial flexibility. MPLX's growth prospects are further bolstered by its robust pipeline of projects and strategic acquisitions.
Organic Expansion Projects and Acquisitions
Organic expansion projects and acquisitions play a significant role in MPLX's growth prospects. The company has several organic expansion projects underway, such as natural gas processing plants, the BANGL pipeline expansion, and the Blackcomb and Rio Bravo pipelines. These projects are expected to come online over the next two years, providing additional sources of cash flow and supporting the company's distribution growth.
In addition, MPLX has made strategic acquisitions, such as enhancing its footprint in the Utica region and increasing its stake in the BANGL pipeline. These acquisitions have helped the company grow its asset base and cash flow, contributing to its distribution growth.
Consistent Distribution Growth
MPLX has increased its distribution every year since its formation in 2012, delivering a robust 10.7% compound annual distribution growth rate since 2021. This consistent growth is a testament to the company's strong financial performance and growth prospects.
High-Octane Income Stock
MPLX pays investors a very lucrative cash distribution these days, with a yield of 7.5%. Given the company's strong financial profile and visible growth prospects, that payout could continue rising at an above-average rate. Those features make MPLX stand out as the top pipeline company to buy for passive income in 2025, as long as investors are comfortable receiving the MLP's annual K-1 tax forms.
In conclusion, MPLX's high dividend yield, stable cash flow, diversified business model, strong financial profile, and growth prospects make it an attractive option for income investors seeking passive income in 2025. With a robust pipeline of projects and a solid track record of distribution growth, MPLX is well-positioned to continue increasing its payout at an above-average rate, providing investors with a high-octane income stock.
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