Want Durable Dividend Income That Can Last for Decades? Buy This Stock and Never Look Back.

The energy sector is ripe with both high-dividend stocks and consistent payout growers. To the delight of income-hungry investors, some stocks fit both bills.

A fine place to locate high-yield dividend growers in the energy patch is the midstream space, home to master limited partnerships (MLPs) and pipeline stocks. The midstream is littered with well-known income powerhouses, including Enbridge and Energy Transfer, among others, but some less heralded names are also deserving of investors' attention. Enter MPLX LP (NYSE: MPLX).

This pipeline stock could provide years of comfort to income investors. Image source: Getty Images.

For those not familiar with this pipeline operator, it was spun off from Marathon Petroleum in 2012 and continues to manage Marathon's pipeline assets. Investors evaluating MPLX need to account for the Marathon relationship because it is, in a word, additive. It's rooted in long-term contracts driving highly visible cash flow, which are vital when assessing this energy stock and its 7.3% dividend yield.

The Marathon partnership is important and is one ingredient in the MPLX dividend recipe. Still, there's much more to like about MPLX, and those other ingredients indicate this could be a durable dividend stock for long-term investors.

Deal-making hones focus

Not all energy stocks benefit from deal-making, but MPLX is a prime example of a company that knows how to execute on that front. Last year, this midstream outfit made three purchases while parting ways with its Rocky Mountain business. That slims the company's focus (in a good way) to the Marcellus and Permian shale regions.

Investors approaching MPLX with a long-term perspective may find those areas of emphasis appealing for several reasons. Acquisitions that deepen MPLX's Permian footprint enable the energy company to strengthen its drill-to-Gulf Coast proposition while fortifying its natural gas liquids (NGLs) exposure.

Long-term investors shouldn't gloss over MPLX's place in the NGL ecosystem. From this year through 2035, the NGL market is expected to nearly double, growing at a compound annual growth rate of 7.1%. North America is the largest NGL market in the world, and liquefied natural gas (LNG) exports are ramping up, and they are at the top of the White House's America energy independence agenda. So while MPLX isn't a 100% pure-play liquefied natural gas stock, its angles on that corner of the energy space may be contributors to long-term share price appreciation.

There's also an artificial intelligence (AI) angle here. Yes, these days it sure feels as though many non-tech companies have "AI hooks," but in MPLX's case, the energy firm is AI-relevant. The reasoning is simple. It's Marcellus, and Permian footprints are favorable in the data center expansion scenario because natural gas is abundant and cost-effective. That's exactly the type of energy data centers crave.

More gas in this dividend's tank

Seasoned energy investors know that dividends are one of the primary reasons to consider pipeline stocks, but it's not just about whether an operator pays today. It's about what they can deliver next year and for years to come.

MPLX answers the payout growth bell with ease. The 12.5% dividend hike announced by the company last October raised the annual distribution to $4.31 per share, meaning it has grown nearly 10 times in just over 11 years. The company is targeting 12.5% distribution growth through 2027, implying a dividend primed to compound.

Skeptical investors may be apt to think MPLX's dividend outlook sounds too good to be true. While some skepticism is warranted in investing, there's good news with MPLX: Its dividend doesn't burden it. It has a 1.8 debt-to-equity ratio, and its $5 billion in liquidity can fund almost two years of spending based on current rates. In the first quarter, MPLX generated $549 million in free cash flow, leading to distribution coverage of 1.3 times. So the dividend is safe with a solid foundation for long-term growth.

Todd Shriber has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Enbridge. The Motley Fool has a disclosure policy.