This High-Yield Stock Just Locked In 30% Growth for 2018

Refining giant Phillips 66 (NYSE: PSX) has been on a mission to help its master limited partnership, Phillips 66 Partners (NYSE: PSXP), increase its earnings and cash flow so it can deliver 30% compound annual growth in shareholder distributions through 2018. So far it has been right on the money, achieving a 33% compound annual growth rate by completing a series of dropdown acquisitions and other transactions. The companies now appear poised to finish that task by completing their biggest deal to date, which gives income-focused investors the opportunity to collect an ultra-safe current yield of 5.1% that has a high probability of expanding rapidly over the next year.

Phillips 66 has agreed to sell its 25% stake in the Bakken Pipeline and a 100% interest in Merey Sweeney to Phillips 66 Partners for $2.4 billion. The MLP expects these two assets to generate $270 million of adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) in 2018. That projection pushes Phillips 66 Partners closer to its aim of generating an annual run rate of $1.1 billion in adjusted EBITDA by the end of next year, which is the level it needs to deliver its promised distribution growth. Given that the company's annualized run rate was $680 million last quarter, it's now within striking distance of that target.

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Source: Fool.com