1 Energy Stock With a Dividend Yield Over 7% Right Now

The energy sector remains an appealing option for income investors, offering a treasure trove of higher-yielding stocks. Currently, the average energy stock in the S&P 500 boasts a yield of around 3%, significantly surpassing the broader market’s 1.3% yield. Yet, among these robust returns, some energy stocks shine even brighter. One such standout is MPLX (NYSE: MPLX), a midstream energy company currently yielding over 7%. Given its impressive financial metrics and growth trajectory, income investors would be wise to consider MPLX as a powerful source of reliable dividends.

### Solid Foundation for High Yields

At first glance, a yield surpassing 7% might raise eyebrows, hinting at potential risk. However, MPLX presents a unique case. As a master limited partnership (MLP), it displays a financially sound foundation supporting its generous distribution. The company has a diversified midstream operation that generates robust cash flow through long-term contracts and government-regulated rate structures. In the first quarter alone, MPLX reported nearly $1.5 billion in distributable cash flow, comfortably covering its distribution by a substantial 1.5 times.

Moreover, MPLX demonstrated its financial prudence by producing around $500 million in excess free cash flow during the same period. This cushion allowed the company to comfortably fund its organic capital expenditures while still having room for additional investments. The balance sheet is equally reassuring, with a leverage ratio of 3.3—well below the 4.0 that its stable cash flows can support, facilitating further growth without undue risk.

### Growth Prospects

What sets MPLX apart even more as a high-yield stock is its impressive growth. In the first quarter, the company experienced a 7% rise in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA), while distributable cash flow surged by 8.5%. MPLX’s earnings and cash flow have been growing at an almost 7% compound annual rate since 2021. This dynamic growth has permitted MPLX to boost its distribution at a remarkable 10.7% compound annual rate in the same timeframe, including a notable 12.5% increase last year.

Looking ahead, MPLX has secured several investments poised to deliver significant returns. The company recently approved the construction of the Traverse Pipeline, set to enter commercial service by 2027, alongside several other projects aimed at enhancing its operational footprint. These initiatives—ranging from construction on two Gulf Coast fractionators to expanding the BANGL pipeline—promise to provide MPLX with substantial visibility into its earnings growth.

CEO Maryann Mannen recently expressed confidence in the company’s future, stating, “We continue to anticipate mid-teen returns on these projects, which will support mid-single digit adjusted EBITDA growth.” Such growth not only sets the stage for future distribution increases but also positions MPLX as a reliable bet for income-seeking investors.

### Strategic Acquisitions

MPLX’s strong balance sheet also facilitates strategic acquisitions, enhancing both its growth rate and distribution potential. Earlier this year, the company entered agreements to acquire various assets, including a 55% stake in the BANGL pipeline for $715 million and additional interests in other strategic projects. These carefully selected acquisitions are expected to bolster MPLX’s existing portfolio, granting it greater financial flexibility and competitive advantage within the marketplace.

### An Investment Worth Considering

Given MPLX’s current yield of over 7%—substantially higher than both the average energy stock and the S&P 500—investors find a compelling argument for considering this MLP within their portfolios. The sustainability and growth potential of MPLX’s dividend make it a rare gem among high-yield stocks. While receiving a Schedule K-1 form each year may seem like a minor inconvenience, the potential rewards of investing in such a reliable income-generating asset greatly outweigh any administrative hurdles.

For investors who are committed to seeking out high-quality, high-yielding income investments, MPLX indeed presents a formidable option. With its strong fundamentals, consistent cash flow, and proactive growth strategies, MPLX stands ready to deliver long-term benefits, appealing particularly to those seeking stability and income in uncertain market conditions. As always, it’s prudent for investors to perform their due diligence, potentially discussing investment strategies with a financial advisor, to ensure alignment with individual financial goals and risk tolerance.

In conclusion, for anyone in search of an energy stock with a satisfying dividend yield and solid growth prospects, MPLX presents a rare opportunity within a high-yielding category. By analyzing the company’s foundational strength and future ambitions, investors can confidently consider incorporating MPLX into their income portfolios, making it an enticing addition to the diverse energy sector landscape.

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