We would like to share an important update on one of the core holdings in our high yield portfolio – Magellan Midstream Partners LP (MMP).
As you might be aware, we added MMP to our portfolio on May 9, 2022, and since then, the stock has delivered a robust return of 22.24%, significantly outpacing the -5.2% return of our benchmark, the iShares Core High Dividend ETF (HDV).
In addition to its capital appreciation, MMP has also been a high-yielding asset in our portfolio, providing us with a yield of 7.56%, which is almost double the 3.88% yield from our benchmark. This has contributed to our portfolio’s overall income and has helped us to provide you with reliable, above-market returns.
We liked this company so much that it was also a holding in our safe dividend and energy portfolio as well. Check out the related news here and here, respectively.
Major News Impacting MMP
We want to bring your attention to the recent news that ONEOK Inc, a U.S. pipeline operator, has agreed to acquire Magellan Midstream Partners in a cash-and-stock deal valued at about $18.8 billion, including debt. Under the terms of the agreement, ONEOK will pay $25 and 0.6670 shares of ONEOK common stock for each outstanding Magellan common unit, representing a premium of 22% based on Magellan shares’ closing price on May 12.
The acquisition will give ONEOK access to Magellan’s refined products and crude oil transportation business, diversifying its operations that have been primarily focused on natural gas. The deal is expected to close in the third quarter of 2023, and should be accretive to ONEOK’s earnings per share beginning in 2024.
This strategic acquisition is anticipated to create a more resilient energy infrastructure company, capable of producing stable cash flows through diverse commodity cycles. Analysts at Raymond James have described the deal as “bold”, stating that the combined company would be “top of the class from a scale and diversification perspective”.
What's Next?
Please stay tuned as we will soon share our decision on the next high-yielding stock we intend to add to the portfolio in the wake of these developments. We remain committed to keeping you updated on our portfolio strategy and thank you for your continued trust in our management.
