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Dividend investors are right to have goals and lofty ones at that, but it pays to remember the old saying, "It takes money to make money." For those aiming for $500 a month, or $6,000 per year, in income from MPLX (NYSE: MPLX), the math isn't inviting, and that may be one of the biggest catches with this midstream stock.
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First, the sort of bad news as it relates to this unheralded, relatively speaking, pipeline stock. Rounding up, its 2026 dividend will be $4.31 a share. Yes, that's appealing, as is the 7.6% dividend yield, which is nearly 7x the S&P 500's metric and well ahead of the yield on 10-year Treasuries. However, the "inconvenient" math is that an investor needs 1,392.1 shares of MPLX to generate $500 a month in income.
Based on the Friday, Oct. 9, closing price of $56.30, an investor would need to plunk down a whopping $78,375 on this energy dividend stock to count on annual income of $6,000. That's a lot of moola. And the other catch is that MPLX pays a quarterly dividend, so monthly income isn't in the cards with this midstream stock.
Fortunately, there's encouraging news. While the math is accurate and daunting, it's somewhat theoretical, given that MPLX is a dividend grower. Last November, the company announced a 12.5% increase in distributions, marking the second straight year in which the payout grew by that percentage. MPLX is aiming to carry that growth rate through 2027.
MPLX's payout growth makes the path to $500 in monthly income a bit easier, particularly if market participants reinvest their dividends over an extended period, accumulating more shares in the process.
Long-term investors can take heart in knowing that MPLX's dividend growth trajectory is on fundamentally sound footing. As just one example, the energy company generated $1.5 billion in distributable cash flow (DCF) in the second quarter, more than covering the $1.1 billion returned to investors via dividends and buybacks.
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Todd Shriber 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.
The Pipeline Stock Wall Street Forgot Could Still Pay You $500 a Month. But There's a Catch. was originally published by The Motley Fool
