You could scarcely ask for a safer pick among the midstream MLPs than Magellan Midstream Partners (NYSE: MMP). It lacks the drama and volatility of similar-sized midstreams like Energy Transfer Equity (NYSE: ETE) and Plains All American Pipeline (NYSE: PAA), which is why I made it my conservative pick for MoneyShow’s Top Picks issue.

MMP hasn’t had the incredible performance this year of the other pick that we submitted, EQT Corporation, but it also doesn’t have EQT’s downside risk. For perspective, while EQT soared by over 50% in the first half of the year, over the past 12 months MMP is up by 2%, while EQT is down by 3.5%.

MMP Magellan owns the longest refined petroleum products pipeline system in the country. Its assets include 9,500-miles of refined products pipelines with 53 connected terminals and 27 independent terminals, 1,600 miles of crude oil pipelines and storage facilities storing about 21 million barrels, and marine terminals along coastal waterways storing approximately 26 million barrels.

For Q1 2016 MMP reported net income of $207.1 million compared to $183.6 million for first quarter 2015. Distributable cash flow (DCF) was $205.3 million for first quarter 2016 compared to $233.1 million for first quarter 2015. The decline was due to the lower petroleum pricing environment, but MMP still managed a coverage ratio of 1.2x.

Following Q1 the partnership’s quarterly cash distribution was raised to 80.25 cents per unit, representing the 56th distribution increase and a 13% compound annual growth rate (CAGR) since its initial public offering in 2001. The first-quarter 2016 distribution is 12% higher than the first-quarter 2015 distribution of 71.75 cents per unit and represents a 2% increase over the fourth-quarter 2015 distribution of 78.5 cents. The new distribution equates to an annualized yield at the current price of 4.3%.

MMP increased its 2016 DCF guidance by $10 million to $910 million, which will maintain a coverage ratio of 1.2x. Management remains committed to increasing annual cash distributions by 10% for 2016 and at least 8% for 2017 while maintaining distribution coverage of at least 1.2 times each year. A bonus for investors is that there are no incentive distribution rights (IDRs) that will be a drag on future growth.

MMP remains the #2 Best Buy in the conservative portfolio for MLP Profits, and it is the #5 Best Buy in the conservative portfolio for The Energy Strategist. The price is still about 7% below the $80 buy limit for both portfolios. MMP is ideal for conservative investors looking for income without undue downside risk.      

— Robert Rapier