Pipeline operator Magellan Midstream Partners, L.P. (MMP) raised its second quarter 2010 cash distribution by 1.7% sequentially and 3.2% year over year to 73.25 cents per unit (or $2.93 per unit annualized). The cash distribution is up 179% since its initial public offering (IPO) in the beginning of 2001. Magellan’s new distribution is payable on August 13 to unitholders of record on August 6, 2010.
Tulsa, Oklahoma-based Magellan Midstream is a master limited partnership (MLP) that owns and operates a diversified portfolio of energy infrastructure assets. The partnership primarily transports, stores, and distributes refined petroleum products and, to a lesser extent, ammonia.
Magellan’s announced distribution hike is in sync with its goal of raising the annual distribution by 4% in 2010. The partnership has a proven history of distribution growth with 33 quarterly increases.
Magellan units are currently rated as Zacks #3 Rank ('Hold'), implying that the stock is expected to perform in line with the broader U.S. equity market over the next one to three months. This is supported by our long-term Neutral recommendation.
Our recommendation on Magellan Midstream takes into account the challenging operating scenario for pipeline operators. While the partnership’s liquidity position is sound and growth potential is attractive, we continue to believe that the near- to medium-term outlook for petroleum products expenditure will stay tentative. Another concern for Magellan is the weak demand for refined products that translates into lower pipeline throughputs.
Read the full analyst report on "MMP"
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