In June, the Consumer Confidence Index was 127, the highest number since Feb. of last year. Consumers are getting more and more optimistic about the economy growing even with continuing worries about inflation. Since this number is such a big signal about the future of stocks, we can expect to see major gains in already fundamentally strong stocks positioned to profit from certain trends in an improving economy.
Retail investors need only $1,500 to invest in certain stocks to benefit from the increasing sentiment. If you have this money and won’t need it for bills anytime soon, then Magellan Midstream Partners represents a great investment. Here’s why:
Magellan Midstream Partners
After a very hard 2020, midstream gas and oil player Magellan Midstream Partners has boosted over 15% this year. The company owns the largest refined petroleum products (mostly diesel and gasoline) pipeline in the country going about 9,800 miles with 47 million barrels of possible storage. After going down by 15.9% in 2020, the refined petroleum market in the country is expected to go up by 7.5% in 2021. MMP stands to benefit from this change since it has access to almost half of the capacity in the country. Based on the expected recovery from travel and overall economic increases and the expansion of the pipeline network in Texas, the company anticipates shipments of distillate, gasoline, and aviation fuel to rise y/y by 10%, 13%, and 25%, respectively, in 2021.
While growing adoption of electric vehicles is a threat, the Energy Information Agency estimates that total petroleum products demand in MMP’s markets will continue to grow slightly through 2050. The company is also moving its focus on the storage and transportation of crude oil and has been expanding its work with the transportation of renewable fuel.
Magellan Midstream Partners has a dividend of 8.4% and has routinely paid dividends for the previous 20 years. The company anticipates its annualized distribution coverage to be at 1.17 for fiscal 2021, close to the long-term annual goal of 1.2. The company has a good balance sheet and is among the highest-rated players in the country. Magellan has a $1 billion credit facility through 2024, while their next bond maturity is in 2025. Given these facts, the company has very good financial flexibility to pay dividends for a long time.
Author: Blake Ambrose