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Magellan Midstream Partners February 12, 2012

Posted by shaferfinancial in Finance, Uncategorized.
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MMP had a very solid 2011. It is one of those stocks that I wished I bought much more of.
But, I should be thankful that I made the decision to buy what I did.
On a macro level the company has a strategy to move away from gasoline transportation and toward crude oil transportation and storage. This proved fruitful as storage was a big winner for them last year.
The 4th quarter saw record quarterly operating profit and net income [$139.8M, $110.3M] with percentage rise of over 25% and 21%. Distributable cash flow also set a quarterly record at $131.3M. All this with weak demand for refined petroleum products [see above strategy change].

The pipeline system benefited from a 7% increase in tariffs, but that was offset by lower gasoline volumes. The terminal business set a quarterly record operating margin of $44.8M. The ammonia pipeline system has now completed testing and is operating a full capacity.

Annual results saw total operating profit of $522.9M compared to $408.4M the previous year. Net income of $413M compared to $311M the year before. Net income per partner/unit increased to $3.66 compared to $2.85. Distributable cash flow was $460.5M compared to $399.8M with a coverage ratio of 1.3.

$200M was spent on capital projects in 2011.

Management set a goal of increased distributions of 8-10% for 2012. Distributions were increased to $.815 for the 4th quarter a total 2011 increase of 7%.

Bottom line profits and distributable cash flow increased significantly at MMP over 2011. The distribution increased a healthy 7% with management suggesting they will do even better in 2012.

Unfortunately, the market has noticed this success. Current market price is $69.27. The price appreciation was 22% for 2011. Since my yield on cost is now up to 12% my total return was over 34% in 2011. Not bad. Now you see why I wished I bought more!

Current yield at this price is 4.71%. Not bad, but hardly a good buy. If you are looking for a good dividend producing stock this might be it. But you might want to wait to see if the price comes down a little before purchasing.

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