These assets are worth more than MPLX’s $2.6 billion market capitalization and would be a perfect fit for the MLP’s portfolio. I believe Marathon Petroleum Corp (NYSE:MPC) will gradually sell the majority of these assets to the MLP in a series of drop-down deals over the next three to five years. In fact, these drop-downs have already started: In May, MPLX purchased an additional stake in a series of crude oil pipelines and barge loading docks from its parent, Marathon, for $100 million.
This deal was immediately accretive to cash flows and allowed MPLX to boost its quarterly distribution to 28.5 cents, equivalent to a 3.2% annualized yield. I’m looking for MPLX to grow its payout at a 20% annualized pace over the next few years, an advantage that fixed-income products like bonds can never offer. Buy MPLX LP (NYSE:MPLX) under $36.50 a share.
P.S. — Like MPLX, some of the most successful MLPs often have a wealthy and powerful company backing them — or what I like to call a “Rich Parent.” These “Rich Parent” stocks are one of my favorite ways to profit in the market right now. One is a low-risk play that has already returned 333% since going public in 2008, while another yields nearly 10%. To find out how to get the names of 20 of my favorite “Rich Parent” MLPs, click here.
– Bob Bogda
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