Magellan Midstream Partners: Standing Strong in Tough Times
MMP’s returns outperformed sector
Magellan Midstream Partners (MMP) held its 2016 Analyst Day on March 31, 2016. The last Analyst Day event was held two years ago in 2014. Since the start of 2010, Magellan Midstream has generated total returns of nearly 200% compared to nearly flat returns for the Alerian MLP Index (AMZ).
Magellan outperformed peers Enterprise Products Partners (EPD), Energy Transfer Partners (ETP), and Williams Partners (WPZ), which generated total returns of 50%, -9%, and 0%, respectively, during the same period. The Alerian MLP ETF (AMLP) generated total returns of -5% during this period.
MMP’s distributions
The above graph compares the total returns of Magellan Midstream and its peers over the last five years. Magellan Midstream’s distributions have grown at a CAGR (compound annual growth rate) of 13% since its inception in 2001. It currently trades at a distribution yield of 4.6%.
Going forward, Magellan Midstream expects 10% distribution growth in 2016 and at least 8% growth in 2017. During both years, MMP expects coverage of 1.2x.
Fee-based income
Fee-based businesses contribute nearly 85% to Magellan Midstream’s operating income. Commodity-related activities, primarily butane blending, contribute the remaining 15%.
In this series, we’ll analyze the key reasons behind Magellan Midstream’s consistent growth. We’ll also see why the company may or may not maintain this growth in the future. To learn more about MMP, read Magellan Midstream: Consistent Performance in Turbulent Times.
Next, let’s take a look at Magellan Midstream’s capital spending over the years and how it’s expected to change in future.
Browse this series on Market Realist: