Entering text into the input field will update the search result below

Magellan Midstream Partners: Still Generating 9% Passive Income

Daniel Schönberger profile picture
Daniel Schönberger


  • Magellan Midstream Partners is attractive for its dividend and is also focusing on share buybacks right now.
  • The company was growing in double-digits in the past two decades, but growth rates will probably slow down in the years to come.
  • Even when assuming only low growth rates, the stock seems to be undervalued.

Pipelines, die zu einer Ölraffinerie führen

MikeMareen/iStock via Getty Images

Recently, I published an article about AT&T (T), which is interesting for its high dividend yield. Another company that is interesting due to a similar high dividend yield is Magellan Midstream Partners (

This article was written by

Daniel Schönberger profile picture
My analysis is focused on high-quality companies, that can outperform the market over the long-run due to a competitive advantage (economic moat) and high levels of defensibility. Focused on European and North American companies, but without constraints regarding market capitalization (from large cap to small cap companies).My academic background is in sociology and I hold a Master’s Degree in Sociology (with main emphasis on organizational and economic sociology) and a Bachelor’s Degree in Sociology and History.I also write about wide economic moats in my Substack: https://stockmarket101.substack.comI also write about investing, economy and similar topics on Medium: https://medium.com/@danielschonberger

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

Comments (42)

MMP, a well-managed and financially sound company (for an MLP) yielding 9.25%, is laughably undervalued from a certain perspective. One reason is the MLP structure, which is highly complex and poorly understood by most investors (including me). Another is that fossil fuels are in sharp disfavor among investors and are likely to remain so (for good reason). Thus, I'd be surprised if MMP's stock price ever rose much from here (same as EPD and others, which are solidly stuck in the doldrums pricewise). The current yield, if maintained, will probably keep the stock roughly where it is for quite some years yet, because enough people are greedy or needy enough (again, like me). I think of MMP and EPD as sin stocks much like tobacco stocks, which have long outlived predictions of doom despite every bad thing the universe could throw at them. There's a mountain of hypocrisy out there about energy that will prop up fossil fuels for a fairly long time. For example, news organizations like the NYT have an anti-fossil-fuel stance but run worried articles about the state of jet travel during the pandemic, and lots of travel ads. Modest positions in these stocks make sense for income-oriented investors, especially retirees, who will probably croak before the companies do.
Coach Baker profile picture
@Daniel Schönberger Great case for MMP and fully agree with your findings. Further, was glad to see a boost in the distribution as well as other advocates like @brad@Brad Thomas. MMP has been my "Dog of the Dow" for the mlp segment of my portfolio. Is the D/E the principle reason the price has been flat?
Incomeiam profile picture
Made my first purchase at $44 today. Hard to pass up the dividend when I’m so close to retirement.
abbaman32 profile picture
@Incomeiam You will be OK. I, on the other hand, having bought my units at $62, will never recover.
abbaman32 profile picture
Another day another beat down.
abbaman32 profile picture
Take a look at the MMP chart. Nothing but a downhill ski slope.
MACD is about to crossover and head up I am buying . At support heading back to 47/48 soon !
abbaman32 profile picture
@jaylee_9899 It is under $44 now. There is no support for MMP. Down huge 7 of past trading weeks and continues to fall. This is an MLP for chumps.
I view this as a buy to hold for long term dividends.
I never intend to sell my shares, just live off of the dividends they provide.

price movements are irrelevant noise, which I view as buying opportunities.

this is what makes the market.

This is an LP and its distributions are NOT dividends. The author needs to be much clear on that.
abbaman32 profile picture
Just another down day. Nothing new.
MMP earns 85% from renting their pipes and storage to other energy producers and participants. Fluctuations in energy demand is a buying opportunity from fluctuating share prices. The CASH FLOW or PROFITS doesn't change because of share price fluctuations.
I'm buying in the 44's, 45's, and 46's believing I'm doing the same thing as management and that the share price will rise above the 50 price level upon release of this quarter's earnings and profitability.
Don't buy MMP if you are worried about LOW COST net debt increasing or EBITDA not increasing enough. EBITDA is NOT a generally accepted accounting principle, some people call it CRAP_IDA and worse. If you don't like MMP's EBITDA then sell.
I like MMP's management and their credit metrics. If you don't, then sell. The company is buying in the mid 40's and many others are rushing to buy in the 44's. MMP's share price doesn't stay in the 44's for very long. Demand for MMP shares is abundant in the mid 40's and not so much in the low 50's when quarterly earnings and dividends are reported. I'm keeping my shares for the 9% dividend and selling my new acquisitions in the 50's for a 10% capital gain.

I could be wrong you should sell your MMP.
PianoCat profile picture
Net debt is increasing every quarter since the pandemic. EBITDA not so much, still below pre-pandemic levels. It appears that MMP is leveraging up its balance sheet to buy back stocks. I'm not sure whether that's a smart thing to do. Why are they so interested in pumping their own stocks at the expense of its balance sheet?
@PianoCat The dividend is a 9% cost, every stock MMP retires they are earning a 9% savings in CASH, screw the balance sheet, the debt costs less than the dividend. I like what mgmt is doing, moreover fewer shares outstanding increases earnings per share and the dividend per share. What's the problem? MGMT just increased the dividend last quarter. Business is good.

SELL your shares if you don't like net debt and increasing EBITDA or hold on to your short position.
houtex profile picture
@Kurt Licherovsky
“ screw the balance sheet”
We’ve come a long way, haven’t we?
PianoCat profile picture
@Kurt Licherovsky I have no position in MMP but when they stop pumping their stock maybe it will take a dive and I might buy some units.

I like MLPs that improve their balance sheet and pay good distributions.
abbaman32 profile picture
MMP is still heading south so I guess it is getting even more undervalued. I am now down 28%. One look at its chart can make one vomit.
@abbaman32 very funny, I'm underwater too. MMP stock fluctuates. Looking backwards at the chart history, MMP fluctuates between 45 and 50 plus. NOW IS THE TIME TO BUY.
abbaman32 profile picture
Take a look at the MMP chart. Since the end of October it resembles a downhill ski slope. And it is still declining. No wonder I am down 27% with this weakling. Yeah, higher distributions and buybacks are really working.
@abbaman32 Very funny again, I earned the last dividend so I'm up 9% in CASH, I HOPE you are too. I'm underwater too but I'm adding in the 44's 45's and 46's. MMP will trade in the 50's again upon dividend declaration.

BUY LOW now SELL HIGH later. All stocks fluctuate for many reasons. Look at the reaction to OMICRON...learn that stocks are always a weak representations of actual value. Sell your shares if you are unhappy.
abbaman32 profile picture
@Kurt Licherovsky It won't be long before we learn whether the lemmings will indeed be buying MMP and sending it skyward after the next dividend declaration.
Thank you, Daniel, very helpful.
Aricool profile picture
nice analysis. thx. however, why take the debt vs growth risk of a single name like MMP, instead I just buy large amounts of MLPA & MLPX and get even higher divys & total return w/o the BK / debt risk. JMTC.
Tony Naples profile picture
The MLPA ETF is an interesting choice I have not previously explored.
In my prior analysis over a year ago, if I remember correctly, there seemed to be more risk with MLPX vs MMP. Will review again as MLPX does have similar distribution, albeit currently slightly higher 10%
@Daniel Schönberger Is the likes of MLPA or MLPX allowed by your German broker?
abbaman32 profile picture
Still staring at a 25% unrealized loss.
Tony Naples profile picture
@abbaman32 Key point per Buffett. Unrealized loss. You own the same number of shares in a company with few shares because of buybacks. in other words you own a greater percentage of the company. Your unrealized loss is also decreased by a very real cash payment of distribution.
1. You can sell now and relieve your stress caused by unrealized loss.
2. You can hang tight and collect dividends which will eventually exceed the unrealized paper loss, netting you an actual gain.
3. You can buy more at this lower price ($44 today), thus averaging down your investment if you believe
a. the stock will continue to fluctuate and go back to $50 or more AND
b. MMP will continue to pay these distributions long into the future.
Make a decision you can live with so you will stop useless complaining.
abbaman32 profile picture
@Tony Naples There is a difference between complaining and merely stating things as they are. Other MLPs are not faring as badly as MMP and I choose not to cheerlead. I think I will be heading for the door shortly and go with some of those better performers.
Has anyone looked at the price chart of MMP over the past decade? It is, in general, a downhill ski slope with a couple of moguls here and there (and this is pre COVID). My guess is anyone who has held this stock for this long is at best even with reinv of dividends. There is no amount of dividend that can be given to make up for such capital erosion. Any one just looking at yield without looking at stock performance is just kidding themselves
bill h illify profile picture
Ok…I’ll bite…Dec 2011, buy at $32…now $46…plus the divs on top of that…could do worse.
rhurry profile picture
@rsmab01 This 10 year ago discussion is as lame as any discussion of 10 years from now. Find a new hobby.
@rhurry Should I live 10 years.
Paperone75 profile picture
Only 44% of growth in 10 years? No, thank you. But I seldom have a look on this stock.
grbbiker profile picture
@Paperone75 Have you looked at the result with dividend reinvesting? You are selling MMP's performance short.
Paperone75 profile picture
@grbbiker No I haven't, probably you have gained much more, doing so.
@Daniel Schönberger I like the article thank you for your effort. You made note that as a foreign investor you can't invest in this because you run the risk of losing more than your original investment. Can you expand on this and how that is possible?

@Overfished I am curious too, as far as I know the worst that can happen is the investment goes to 0.
houtex profile picture
It may be concerning the tax impact of something like CODI but maybe not. I’m also curious what the author was thinking of.
PianoCat profile picture
@Overfished Foreign investors get a 37% withholding tax on dividend from a MLP. If the MLP is paying out dividend and depreciating in share price then you could end up losing money very easily because of that 37% tax.
Income4ever aka Cyclenut profile picture
Good commentary
Long MMP , EPD and ENB
Disagree with this article? Submit your own. To report a factual error in this article, . Your feedback matters to us!
To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.