Here's How Many Shares of MPLX You'd Need for $1,000 in Yearly Dividends

MPLX (NYSE: MPLX) currently offers a monster yield. The master limited partnership (MLP) -- which sends investors a Schedule K-1 Federal Tax Form -- has a current distribution yield of 7.7%, putting it several times higher than the S&P 500's 1.1% dividend yield. As a result, an investment in this energy midstream company can generate a lot of passive income.

Here's a look at how many units of the MLP you'd need to buy to generate $1,000 of annual income.

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An income-producing machine

MPLX currently pays a quarterly distribution of $1.0765 per unit ($4.31 annualized). That's 12.5% higher than its prior level following a payment hike in November.

At that rate, you'd need to own 232 units of the MLP to generate $1,000 of distribution income each year. That would cost you around $13,000 at the recent price of about $56 per unit.

That's a significantly lower investment amount compared to what you'd need to invest in an S&P 500 index fund. Given the market's current yield, you'd need to invest almost $88,500 to generate $1,000 of annual dividend income.

While high-yielding dividend stocks can have a higher risk profile, that's not the case with MPLX. The MLP's midstream operations generate very stable cash flow backed by long-term contracts and government-regulated rate structures. Additionally, it has a conservative financial profile. It produces enough cash to cover its current distribution payment by a comfortable 1.3 times. Meanwhile, MPLX's leverage ratio was 3.7 times at the end of the third quarter, below the 4.0 times range that its stable cash flows can support.

MPLX has the financial flexibility to make acquisitions and invest in expansion projects. It currently has a large backlog of organic capital projects under construction that should come online through 2029. That should give the MLP the fuel to continue increasing its distribution. It has raised its payment every year since its formation in 2012, including growing it at an 11.6% compound annual rate since 2022.

Matt DiLallo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.