The Secret is Revealed: Purchase This Outstanding High-Yield Dividend Stock Before Wall Street Notices

Delek Logistics Partners is a company involved in the storage and transportation of petroleum products. ( DKL 0.28% ) is largely unnoticed by the majority of Wall Street analysts. Only a few of them follow the company, and among those, opinions vary: two recommend holding the stock, one suggests buying it, and another rates it as a strong buy.

Due to its limited publicity, it’s probable that the majority of investors are unaware of how excellent the A master limited partnership (MLP) is a type of business structure that combines aspects of a partnership and a publicly traded company. It is typically used in the energy sector and allows the company to enjoy tax benefits similar to a partnership while offering shares that can be bought and sold on the stock market, like a corporation. has been effective in distributing cash to its investors. It recently achieved its 46th consecutive quarterly increase in distribution. The raise, nearly 2%, boosted its yield to nearly 11%.

This substantial source of income is built on a solid foundation and is likely to keep increasing. This makes it extremely appealing dividend stocks

Creating a strong base

Delek Logistics produces a lot of consistent cash flow. The midstream company offers logistical services to its parent company, refiner Delek US Holdings (NYSE: DK ), as well as external customers. It has recently updated and prolonged its contracts with Delek. US for as long as seven years, enhancing its visibility over the long term.

In the meantime, the company has been attempting to broaden its reliance on its parent company by purchasing and developing assets to serve external clients. At present, half of its profits come from its parent company, but it anticipates this figure will decrease to 36% in the latter half of next year as it continues to expand its business with third-party clients.

The MLP produces sufficient cash to comfortably meet its large distribution payment, with a significant surplus. At the end of the second quarter, it had a distribution coverage ratio of 1.32 times. This robust coverage allows the company to hold onto extra cash to support its ongoing growth and improve its financial stability.

Delek Logistics Partners has recently making efforts to strengthen its monetary base by lowering its leverage ratio , which decreased to 3.81 by the end of the second quarter from 4.34 at the conclusion of last year and 4.89 at the close of 2022.

The organization possesses successfully reduced It has managed its leverage effectively while still investing in the growth of its operations and cash flow. This strategy has enabled it to boost its distribution without needing to increase its coverage ratio. Over the past year, the MLP has raised its distribution payment by 5.3% while maintaining its coverage ratio steady at the 2022 level of 1.32.

The energy to keep expanding

In recent years, Delek Logistics Partners has made significant efforts to broaden and vary its operations. In 2022, the company acquired 3Bear Energy for $624.7 million in cash. This move aimed to increase third-party revenue, diversify its activities, and support its growth. The acquisition produces substantial free cash flow, allowing the company to lower its leverage ratio and increase its distribution.

Recently, the MLP expanded by acquiring two additional companies. One of these acquisitions was Delek. US’ stake in the Wink to Webster Pipeline System, responsible for transporting crude oil from companies such as ExxonMobil from the Permian Basin to processing and export destinations along the U.S. Gulf Coast. The company also decided to purchase H2O Midstream for $230 million to enhance its midstream services in the Permian Basin. These transactions will broaden the range of the company’s activities and increase third-party volumes, thereby reducing its dependence on Delek. US .

Delek Logistics Partners plans to invest in growth projects as new opportunities present themselves. The company has recently decided to construct a new natural gas processing plant close to an existing facility in the Delaware Basin part of the Permian. This new development, along with its recent acquisitions, will establish Delek Logistics as a leading full-service midstream provider in the Permian Basin.

The company’s investments aimed at fostering growth will provide it with an increasing flow of additional cash that should permit the MLP to proceed increasing its generous returns further .

A smoothly running revenue generator

Delek Logistics Partners has discreetly put together The company has an impressive history of consistently raising its payouts to investors. This is supported by a reliable cash flow and a strong financial base. The MLP’s financial adaptability has allowed it to keep investing in expanding its operations, likely enabling it to boost distribution payments moving forward.

This makes it an attractive choice for individuals looking for a profitable and consistently growing source of income, provided they are at ease with the tax intricacies involved in investing in a Master Limited Partnership (MLP), such as the requirement to send a Federal Tax Form Schedule K-1 each year).