Investors looking for sky-high income should consider dividend stock MPLX (MPLX), which currently delivers a market-leading 9.47% annual yield. But there are some risks.
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Marathon Petroleum (MPC) formed MPLX as a limited partnership in 2012. As owner, operator and developer of the oil producer’s midstream energy assets, MPLX currently operates over 10,000 miles of crude and gas pipelines, primarily situated in the American Midwest.
Energy supply constraints and soaring prices have been a dream combination for the energy industry and MPLX has been outperforming its peers. The dividend stock currently ranks first in IBD’s Oil and Gas-Transport/Pipeline industry group, with a top Composite Rating of 99.
Dividend Stock Hikes Payout … Again
MPLX announced another dividend stock hike on Nov. 1, bringing the quarterly payout to 77.5 cents per share. With an annualized yield of 9.47%, MPLX ranks miles above the 1.6% average yield of the S&P 500 and more than double the increasingly-attractive 4.6% one-year Treasury yield.
Despite high odds for an economic slowdown next year, earnings per share estimates call for a profit of $3.49 per share in 2023, marginally lower than the $3.66 projected for 2022.
MPLX will report fourth-quarter earnings results on Jan. 31, with consensus for a quarterly profit of 85 cents per share on revenue of $2.64 billion. If met, these results should allow the company to keep delivering eye-watering dividend yields.
However, this midstream producer and dividend stock is still exposed to a volatile energy market. In a worst-case scenario, a prolonged drawdown in energy demand could send share prices lower and shrink the dividend. It has happened before, with a five-year decline from 2015 dumping MPLX shares by 90% at the peak of the Covid pandemic.
While a repeat of this scenario may be unlikely, at least in the near term, investors should avoid overexposure to the volatile energy sector.
The current technical outlook on this dividend stock is constructive.
MPLX is currently trading sideways in a six-month consolidation pattern, about 8% below the 35.59 buy point. It just lifted off a multiweek test at the 200-day moving average but is still trading below the 50-day moving average.
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Source: https://www.investors.com/research/the-income-investor/top-dividend-stock-mplx-steals-the-show-with-jaw-dropping-9-47-yield/?src=A00220&yptr=yahoo