A sizeable part of portfolio returns can be produced by dividend stocks due to their contribution to compounding returns in the long run. MPLX LP (NYSE:MPLX) has returned to shareholders over the past 5 years, an average dividend yield of 5.00% annually. Does MPLX tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis. View our latest analysis for MPLX
How I analyze a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
- Is their annual yield among the top 25% of dividend payers?
- Does it consistently pay out dividends without missing a payment of significantly cutting payout?
- Has it increased its dividend per share amount over the past?
- Is is able to pay the current rate of dividends from its earnings?
- Will it be able to continue to payout at the current rate in the future?
How well does MPLX fit our criteria?MPLX has a trailing twelve-month payout ratio of 146.76%, which means that the dividend is not well-covered by its earnings. In the near future, analysts are predicting a lower payout ratio of 130.25%, leading to a dividend yield of 7.49%. However, EPS should increase to $2.33, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment. If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. The reality is that it is too early to consider MPLX as a dividend investment. It has only been consistently paying dividends for 5 years, however, standard practice for reliable payers is to look for a 10-year minimum track record. Relative to peers, MPLX generates a yield of 6.80%, which is high for Oil and Gas stocks.
After digging a little deeper into MPLX’s yield, it’s easy to see why you should be cautious investing in the company just for the dividend. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. I’ve put together three important factors you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for MPLX’s future growth? Take a look at our free research report of analyst consensus for MPLX’s outlook.
- Valuation: What is MPLX worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether MPLX is currently mispriced by the market.
- Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.