MPLX LP (MPLX), Holly Energy Partners, L.P. (HEP), Sunoco Logistics Partners L.P. (SXL): The Market’s Best MLP Spin-off

Clearly, MPLX LP (NYSE:MPLX) is at a relative disadvantage given its brief publicly traded life, but Sunoco Logistics Partners L.P. (NYSE:SXL) is head and shoulders above the rest of the crowd. The best explanation for its outperformance can be found in our next table, which shows the distribution growth over the lifetime of the MLP:

Source: Ycharts.

Despite having a seven-year head start, Holly Energy Partners, L.P. (NYSE:HEP) has a similar lifetime performance record as Tesoro Logistics, likely due to very similar numbers for lifetime distribution growth. Clearly, when analysts and management go on and on about distribution growth, it’s for a reason: It is the No. 1 driver of MLP performance, and this group reflects that.

It’s important to note one other specific fact about the group above regarding the success of Sunoco Logistics Partners L.P. (NYSE:SXL): Its parent company, Sunoco, exited the refining business altogether in 2011. Energy Transfer Partners LP (NYSE:ETP) bought out what was left of the company last year, picking up 32% of Sunoco Logistics Partners L.P. (NYSE:SXL)’ limited partner units, a 2% general partner stake, and all of its incentive distribution rights along the way. Through the first six months of the year, Sunoco Logistics Partners L.P. (NYSE:SXL) handed over $94 million to Energy Transfer Partners LP (NYSE:ETP) in distributions.

The lesson is that a well-built midstream network can provide value that lasts, even if the parent company doesn’t.

Bottom line
Distribution growth is the No. 1 performance driver for any MLP. It’s important to keep this tenet in mind as more MLPs hit the market. If an MLP is able to grow its distribution, then investors win twice when the share price appreciates right along with it.

The article The Market’s Best MLP Spin-off originally appeared on Fool.com and is written by Aimee Duffy.

Fool contributor Aimee Duffy has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

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