Magellan Midstream Partners
Dividend Yield: 3.7%
While most pipeline and midstream firms have been adding natural gas exposure to take advantage of rising production in the U.S., Magellan Midstream Partners (MMP) has taken a more “oily” approach and focuses pretty much exclusively on crude oil assets. The MLP’s 9,600 miles worth of pipelines and 80 million barrels worth of storage represent the longest network of refined petroleum capacity products in the country.
Taken another way, MMP’s midstream network can tap into more than 40% of the nation’s total refining capacity. That’s a pretty big deal.
This dominance has allowed Magellan to continually grow its distribution and cash flows in a variety of market conditions — including rising interest rates. For the latest quarter, Magellan reported a 40.1% year-over-year increase to its distributable cash flow. Not surprisingly, MMP also upped its payout for the third quarter by 5% to sit at 55.75 cents, or $2.23 annualized. So far this year, Magellan has raised its distribution by 15%.
Perhaps more importantly, MMP management estimates it will be able to increase the distribution by at least that much in 2014 … making this MLP a perfect way to beat rising interest rates.