Sunoco LP Poised to Outperform ExxonMobil and Chevron in Dividend Growth

Sunoco LP is an underappreciated pipeline stock that could outperform ExxonMobil and Chevron in terms of dividend growth over the next five years. The company has already increased its quarterly dividend for seven consecutive quarters, with a recent hike of 1.25%. This growth rate puts Sunoco on track to meet its stated objective of at least 5% annual distribution growth.

The pipeline operator's current yield is 5.3%, which is above the typical yields seen in integrated oil equities. However, this yield isn't a cause for concern, as Sunoco's net leverage ratio is at 3.98x and the company is considered a disciplined capital allocator, prioritizing debt management and dividend growth.

Recently, Sunoco announced its $600 million acquisition of Offen Petroleum, which is expected to be accretive and increase cash flow for distribution growth. While this deal may not be earth-shattering news in the energy sector, it could pave the way for dividend growth above 5% starting next year.