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Petroleum storage and transportation partnership Magellan Midstream Partners L.P. (MMP - Analyst Report) increased its fourth quarter 2012 distribution by 3% to 50 cents per unit ($2.00 per unit annualized). This payout is 23% higher on an annualized basis. The new distribution will be paid on Feb 14, 2013 to shareholders of record as of Feb 6, 2013.

Magellan Midstream’s latest payout hike marks the 43rd distribution increase since its initial public offering (IPO) in 2001.

The distribution hike reflects continued strong performance by the partnership, backed by solid operating results, good investments and a diligent execution of its strategic plan. We believe that the partnership will be able to generate sufficient cash flows for its shareholders in the coming years, which will likely be backed by strong operating performances and good management decisions. Prior to this revision, in October 2012, the company increased its quarterly distribution by 3%.

We believe that the increase in distribution will boost investors’ confidence in the stock, thereby driving unit value.

Tulsa, Oklahoma-based Magellan Midstream owns and operates a diversified portfolio of energy infrastructure assets. The partnership conducts its operations in three segments, namely, Petroleum Products Pipeline System, Petroleum Products Terminals and Ammonia Pipeline System.

We like Magellan Midstream’s low risk, stable business model and a proven track record of distribution growth. The partnership’s high-quality and diversified midstream assets are also projected to generate stable and recurring revenues through long-term fee-based contracts.

Magellan Midstream currently carries a Zacks Rank #2 (Buy). Besides Magellan Midstream, Williams Companies Inc. (WMB - Analyst Report), Williams Partners L.P. (WPZ - Snapshot Report) and Western Refining Inc. (WNR - Analyst Report) also increased their capital redeploying efforts recently through payout increases.

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