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Magellan Midstream Partners 3rd Quarter November 30, 2011

Posted by shaferfinancial in Finance.
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The smallest holding I have and my newest stock is Magellan Midstream Partners.
Do I wish I had invested much more in this stock? Well, yes. Up over 100% since I bought it in 2009 it has been a big winner for me. But, I didn’t buy it for that reason. I bought it for it’s dividend stream. It’s most recent dividend was $.80 for the last quarter. It continues to grow.
Currently the dividend coverage is a healthy 129%.

It’s last quarter was the best ever with $137M in operating profits compared to $82M the third quarter of last year. Net income was $.98 per unit versus $.51 last year. It has $198M in cash available along with around $700M in unused credit. This last quarter’s profit was accomplished with a 8% decrease in gasoline movement [4% increase in Diesel and Jet Fuel]. All capital projects are progressing as proposed. There are a couple of new projects being discussed at this time. MMP has plenty of available cash as well as credit to make significant capital improvements if suitable projects are found.

In short, MMP is in very good shape going forward. My current yield to cost is approaching 11%. Unfortunately, this stock is no bargain at $63.98. I am more than satisfied with my investment in MMP, but as they say “timing is everything,” so I will be reticent to add to my holdings at the current price. I do reinvest dividends though so will end up with more as we go forward.

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1. Rob G - December 15, 2011

David, as you do not recommend buying into this company now(due to its share price), what are your thoughts on other MLPs, either individually or through an ETF ? I believe Alerian is the primary ETF, or do you suggest doing the research to look for individual companies? Thanks

shaferfinancial - December 15, 2011

The price is a little rich right now for MMP. I suggest you research the top 4 or 5 companies and decide which one[s] you think have the best forward looking income stream. At that time a little patience might be needed to wait as all the MLPs are in favor now and commanding premium prices. Seeking Alpha has a lot of articles on MLPs so you might want to try there first. I am not an index guy and would suggest owning the actual companies instead of an index.


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