Michael R. Wagner, Managing Director and Portfolio Manager at MAI Capital Management, LLC, says Magellan Midstream Partners, L.P. (NYSE:MMP) is among his top holdings. He says Magellan is a major transporter of crude oil with operations both at the crude and refined product levels, both interstate and intrastate, as well as marine facilities. In addition, the company has grown its footprint to shale basins that are quite wet and lucrative.
“They just released earnings last month, and even though the price of oil fell, their margins have increased significantly,” Wagner says. “Their crude-oil segment’s operating margins grew by over 40%. So here is a company that, despite crude oil falling in price, its operating margins in the crude-oil segment grew, and it grew because they are shipping more crude oil, it’s as simple as that, the volumes grew.”
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Wagner says Magellan’s profit margins have increased more than 30% in the marine segment from increased volumes and higher storage rates. In addition, he likes Magellan’s management team and the company’s growing dividend.
“On a quarter-over-quarter basis, Magellan increased its dividend 4.9%. That’s not bad. On a year-on-year basis, it increased its dividend 18.8%. And this isn’t just a rare occurrence; its dividend distribution growth rate is 13% for the past five years,” Wagner says. “So if we can identify a company that has a current yield of 3%, let’s say, and it’s growing that dividend at a double-digit clip, we think that’s a good value proposition.”
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