Martin Midstream Partners L.P. (MMLP), Kinder Morgan Energy Partners LP (KMP): A High-Yielding Energy Company for Income Investors

Page 1 of 2

The midstream industry, those companies responsible for carting oil and gas to and fro, is known among dividend investors for its high-yielding investment opportunities. Many of these businesses are structured as master limited partnerships (or MLPs), a designation that requires the entity to pass its earnings through to its partners, which is where the high yields come from. The company I’m looking at today is Martin Midstream Partners L.P. (NASDAQ:MMLP) . It boasts an 8.9% yield and an annualized distribution of $3.08 per unit.

10 MLPs with Impressive Dividend YieldsThe story behind the yield
Martin Midstream Partners L.P. (NASDAQ:MMLP) is an MLP based in Kilgore, Texas. Things are going quite well for the company right now. Operating income in 2012 came in at $73.84 million, a significant increase from 2011′s $47.35 million. At the center of its business are four distinct operating segments:

Terminals and storage

Natural gas services

Sulfur services

Marine transportation services

We are accustomed to think of midstream players as pipeline operators, but many companies in the industry make a great deal of money from energy-related businesses outside of pipelines. Kinder Morgan Energy Partners LP (NYSE:KMP) has its terminals and CO2 business; Enbridge Inc (USA) (NYSE:ENB) has wind and solar, etc.

From an earnings perspective, Martin’s sulfur business is its most lucrative, generating $12.5 million in net income in the fourth quarter of 2012 and $41.9 million for the full year. Its marine transportation segment is the weakest, generating a loss of $612,000 in the same quarter, though it was profitable for the full year, generating $6.75 million over the course of 12 months. I expect both of these segments to do well in the future so let’s take a closer look.

Sulfur
If there is anyone in the world who would equate the smell of rotten eggs with cash money, they most certainly work at Martin Midstream Partners L.P. (NASDAQ:MMLP). The company processes and distributes sulfur produced by Gulf Coast oil refineries. Most of it winds up in fertilizer or industrial chemicals. Martin has six sulfur-based fertilizer plants and one emulsified sulfur blending plant. It also has four sulfur prillers, which are facilities that form molten sulfur into pellets. The combined capacity of these plants is about 5,000 tons per day.

Sulfur sales have grown from 62,000 tons in 1997 to 306,000 tons in 2012. Earnings for this segment have really taken off in the last few years, climbing from $15.7 million in 2009 to $37.2 million in 2012. This trend should continue if the U.S. petrochemical industry grows the way many think it will over the course of the next few years. As it is, domestic and foreign demand for sulfur remains high.

Marine Transportation Services
Martin Midstream’s marine transportation services segment has seen better days. EBITDA has declined since reaching $22.7 million in 2010.

The partnership operates 54 inland marine tank barges, 29 inland marine push-boats, four offshore tank barges, and four offshore tugboats. It transports asphalt, fuel oil, gasoline, sulfur, and other bulk liquids around the Gulf Coast, East Coast, and the U.S. inland waterway system, which includes the Mississippi River. Martin is also active in the Caribbean, Central America, and South America .

The partnership recently engaged in two strategic deals to boost this segment. At the beginning of January, Martin Midstream announced it was acquiring Talen’s Marine & Fuel for about $47.4 million. The deal gives Martin 10 more marine terminals on the Gulf Coast as well as fueling barges and tug boats. When it was announced, the CEO of Martin Midstream’s general partner offered us this, “We expect stable and growing through-put throughout our entire marine terminal system as current forecasts show favorable activity in the Gulf of Mexico.” We’ll get to that favorable activity in just a minute.

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The Most Successful Reality TV Stars

Cheapest Cities to Visit in the US

Most Expensive Summer Camps

Most Expensive Animals in the World

Most Expensive Specialty Crops in the World

Movies That Took Ages to Make

The Longest Hollywood Films Ever Made

Most Expensive Concert Stages

The Richest Bands of all Time

10 Most Corrupt Countries 2013 List

10 Countries with the Highest Quality of Life Index

Most Expensive Mattresses in the World

5 Smallest Countries by Land Area

The Ultimate Heartbreak Songs

Richest Teenagers in the World

10 Most Haunted Places in America

10 Best Places to Retire in Florida East Coast

Top 10 Places to See Before You Die

Top 8 Countries in the World Where Justice Prevails

10 Richest States in America

15 Wealthiest Countries in the World

Richest Singers in the World

Most Expensive Tasting Menu in New York City

Most Expensive Baby Items in the World

Most Expensive Hotel Suites in Vegas

Most Expensive Brunch in New York City

Most Expensive Beef Cuts in the World

25 Best Colleges to Get a Job

Top 10 US Supermarkets

The 25 Most Dangerous Cities in the World to Visit

Most Expensive Xbox Games

Top 11 Cities Where Billionaires Live

Top 10 Most Charitable Companies in America

Most Expensive Seafood in the World

The 10 Wildest Conspiracy Theories

The 10 Best Job Markets in the US

Top 10 Accounting Scandals of All Time

The 25 Biggest Cities in the World

Top 10 Best Paying Virtual Jobs

Most Expensive Leather Shoes in the World

Top 6 Things to Buy in March

The 10 Most Stressful Jobs in America – 2014 List

Top 10 Jobs for Introverted People

Top 10 Honeymoon Destinations in the World

Top 10 Highest Paying Jobs in the World

Most Expensive Day-Care in New York City

The 10 Cheapest Places to Retire Abroad

Top 10 Most Expensive Luxury Cars in the World – 2014

Killer Small Business Ideas

The 50 Best Personal Finance Blogs

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!