Magellan Midstream Partners (MMP) - Get Report , a master limited partnership, seems to have it all: a forecast for double-digit gains in its share price, a 4.7% yield, a strong balance sheet and a track record of substantial cash flows.

Shares have sold off significantly from their June peak, meaning that right now is a great time to invest in this large-cap transporter and distributor of petroleum products.

Among the various energy infrastructure companies and master limited partnerships, Magellan Midstream Partners stands out as a great pick.

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Magellan Midstream Partners offers relatively modest debt levels and a strong credit rating. It also has been smart in managing its dividend payments to investors.

The partnership has managed to do all of this while retaining a decent cash reservoir every quarter, equipping it to make business investments as necessary and acting as a cushion when hard times come.

The business model is relatively simple: Magellan transports, stores and distributes petroleum products. It says it possesses the longest refined petroleum products pipeline network in the U.S., allowing it to gain access nearly 50% of the nation's refining capacity. The partnership also says it's capable of storing more than 95 million barrels of petroleum products such as gasoline, diesel fuel and crude oil.

If you compare Magellan Midstream Partners with Spectra Energy Partners (SEP) , Magellan's growth prospects may not seem as attractive. By the end of next year, Spectra plans to put into service $5.7 billion of new projects, according to this Motley Fool article. Magellan, on the other hand, is looking to add less than $1 billion of new projects, the article added.

Spectra predominantly operates in the fast-growing natural gas segment, while Magellan handles refined petroleum products, a more mature market, the Motley Fool article pointed out. 

Another master limited partnership with ambitious growth plans is Enterprise Products Partners (EPD) - Get Report , which is working on $5.6 billion in new projects, according to another Motley Fool article.

Even so, analysts forecast that Magellan Midstream Partners will deliver the best earnings growth over the next five years. On average, they expect adjusted earnings per share to grow an average of 8.0% a year over that period. By contrast, analysts forecast 5.2% average annual adjusted EPS growth for Spectra and 5.4% for Enterprise Products Partners.

Magellan appears focused on strong but manageable growth. It has maintained its share counts at 226 million to 228 million since 2011. Spectra, meanwhile, has tripled shares outstanding to finance its growth plans.

This focus on stability makes Magellan a better dividend grower than pipeline competitors such as Plains All American Pipeline (PAA) - Get Report and Energy Transfer Partners (ETP) .

Over the last five years, Magellan has grown its dividends by at a 15% compounded annual growth rate, according to Simply Safe Dividends. That compares with 8% for Plains All American Pipeline and 2.7% for Energy Transfer Partners.

Magellan's payout ratio of 93% is pretty comfortable compared with Enterprise Product Partners' 129%, Plains All American's 406% and Energy Transfer Partners' 639%. Of the MLPs discussed so far, only Spectra Energy Partners has a lower payout ratio, at 82%.

We must commend Magellan Midstream Partners' management. Its diversified distribution and storage network and more-cautious growth strategy have helped it maintain an attractive and growing dividend even during a time of of low oil prices and difficulty for many energy companies. It's one of the best dividend growth opportunities in the energy sector today.


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The author is an independent contributor who at the time of publication owned none of the stocks mentioned.