Looking for Passive Income? Consider This Tried-and-True Energy Stock
ExxonMobil's stock recently clawed its way back to its all-time highs, pushing its yield down to 3.3%. Meanwhile, Magellan Midstream Partners (NYSE: MMP) is still 40% or so below its all-time highs and offering a huge 7.8% distribution yield. If you are looking for some passive income in the energy sector, Magellan's fat yield should be of interest to you.
One of the main reasons why Exxon's stock has rebounded to its high watermark is that its top and bottom lines are directly tied to the price of oil and natural gas. These commodities are highly volatile, and their prices have, over the past year or so, skyrocketed. Meanwhile, Magellan doesn't really care too much about commodity prices. Its core business is collecting fees for helping to move oil and refined products. It gets paid so long as its system is being used.
The core of Magellan's business is in the refined products space, which accounted for around 72% of operating margin in 2021. Essentially, this division helps to move things like gasoline and diesel fuel. The rest of its business is tied to moving and storing crude oil. A full 85% of its operating margin is fee based, which makes its business highly reliable even during energy downturns.
Source Fool.com
