Why MPLX Is a Great Dividend Stock
MPLX (NYSE: MPLX) is trading at an eye-popping yield of more than 14%. That's much higher than the MLP's average yield since it was spun off of its parent company Marathon Petroleum (NYSE: MPC) in 2012. Like most energy companies, MPLX's operations have been hit by COVID-19. This has impacted MPLX stock, pushing its already high yield still higher. The company is taking steps to lessen the impact of current market conditions. MPLX is good at keeping its debt under control, which should help it in the current crisis.
Despite acquisitions, and taking on debt to make them happen , MPLX has managed to keep its leverage under control. MPLX's debt-to-EBITDA ratio stands at more than 5 times. However, adjusting for noncash impairment charges, the company's debt-to-adjusted EBITDA ratio is at a comfortable level of 4.1 times. Like depreciation and amortization, impairment is a non-cash charge. As the company did not actually pay cash for this charge, it makes sense to add it back to income for arriving at adjusted EBITDA. While impairment charge reduces a company's equity, EBITDA adjusted for impairments better reflects a company's operational performance.
MPLX's debt-to-EBITDA ratio rose after each of MarkWest and Andeavor acquisitions. However, earnings from acquired assets meaningfully contributed to MPLX's earnings over the years, in turn helping to bring back the ratio to reasonable levels.
Source Fool.com
