DKL Stock: A Less Risky, 10.93%-Yielding Play on Energy Sector?
May 30, 2025
DKL Stock Remains Under the Radar for Now…
In the income investing spotlight today is DKL stock.
When it comes to investing in the energy sector, most people immediately think of upstream companies—the oil drillers and explorers trying to pull oil and gas from the ground. These companies can make a lot of money when oil prices soar, but they can also get crushed just as quickly when prices fall. It’s a boom-or-bust game.
Midstream companies, on the other hand, play a very different role in the energy supply chain.
Instead of drilling or refining oil, midstream firms handle the transportation, storage, and logistics of crude oil, natural gas, and refined products. Think of them as the toll operators of the energy highway. Essentially, they make money by charging fees as oil and gas move through their pipelines regardless of what energy prices are doing.
With this in mind, take a look at Delek Logistics Partners LP (NYSE:DKL). This under-the-radar midstream energy company has been rewarding DKL stock holders with an increasing dividend for more than a decade.
What Does Delek Logistics Partners Do?
Delek is a midstream, energy master limited partnership (MLP) that owns, operates, acquires, and constructs crude oil and refined products logistics and marketing assets. The assets are company-owned and owned via joint ventures.
The partnership operates through four major business segments: Gathering & Processing, Wholesale Marketing and Terminalling, Storage & Transportation, and Pipeline Joint Ventures.
Delek’s key areas of operations revolve around the Permian Basin, the Delaware Basin, and other regions in the Gulf Coast area. This includes Texas, Tennessee, Arkansas, and Oklahoma.
All in all, Delek Logistic Partners has 850 miles of crude oil and product transportation pipelines and a 700-mile crude oil gathering system. (Source: “Overview,” Delek Logistics Partners LP, last accessed May 22, 2025.)
Another Quarter of Stellar Results
Delek Logistics continues to have excellent momentum carrying into 2025 from 2024.
On May 7, the partnership reported its financial results for the first quarter of 2025. There were encouraging data across the board, with record results.
Delek Logistics reported first-quarter 2025 net income of $39.0 million, or $0.73 per diluted unit. In the same period a year ago, net income was $32.6 million, or $0.73 per diluted unit. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) for the first quarter reached $116.5 million, compared to $101.5 million in the first quarter of 2024.
Net cash provided by operating activities at Delek Logistics was $31.6 million in the first quarter of 2025. In the first quarter of 2024, cash provided by operating activities was $43.9 million.
49th Dividend Increase for DKL Investors
Delek Logistics isn’t new to the dividend game; in fact, this partnership plays it really well.
DKL stock has increased its distribution for 49 consecutive quarters as of the first quarter of 2025. That’s more than a decade of uninterrupted payout growth. During this time, we have seen a massive oil price crash, a once-in-a-lifetime health crisis, inflation spikes, and everything else in between.
To say the least, this kind of consistency is rare in the energy space. Most oil and gas stocks are still trying to regain investor trust after slashing dividends during downturns. Meanwhile, Delek Logistics just kept handing out more cash.
At the current price, DKL stock has a dividend yield of 10.93%, paying $4.44 on an annual basis.
With all this said, the obvious question now is: are these payouts safe?
Let’s look at the numbers.
In the most recent quarter, Delek Logistics reported distributable cash flow (DCF) of $75.1 million, and paid out $59.3 million in distributions. That works out to a coverage ratio of 1.21x—which is more than enough to keep the dividend intact and even allow for growth.
Could the company hit a rough patch given how volatile oil prices have been lately?
Sure, it’s possible, as no business is bulletproof. But the combination of fee-based contracts, steady volume, and its proven management team gives Delek Logistic an edge.
Let me just say this: the yield on DKL stock is high, and some might deem it risky, but there’s quality here, too.
Chart Courtesy of StockCharts.com
The Lowdown on DKL Stock
For the income investor who’s tired of chasing yield or waiting for big tech stocks to start sharing their cash, Delek Logistics Partners could be good portfolio fit. Obviously, this is not a recommendation to buy or anything of that sort, but DKL stock is presenting a great opportunity at a time where it’s hard to find a decent yield.
With DKL stock, a shareholder gets:
- A close to 11% dividend yield, thanks to Delek Logistics’ long-term contracts
- A 49-quarter streak of dividend hikes
- Exposure to oil without the kind of risk you’d assume with upstream companies
- Management committed to shareholders
It’s also worth noting that DKL stock has significant insider ownership. As per the most recent data, close to 65% of all outstanding shares are held by insiders.
What does this mean?
It means that insiders have a lot of skin in the game and every reason to make sure Delek Logistics does well.
