Energy Business

September Worst Month in History for Energy MLPs: 3 to Buy Right Now

Enterprise Products Partners

This is one of the largest publicly traded partnerships and a leading North American provider of midstream energy services to producers and consumers. Enterprise Products Partners L.P. (NYSE: EPD) once again, despite the energy slump, just raised the distribution 1%. The company maintains a very good long-term position in the market. It provides many of its services on the basis of long-term, fixed-fee contracts, insulating against some of the wilder swings of the commodities that it trades in.

One reason why many analysts may have a liking for the stock might be its distribution coverage ratio. That ratio is well above one times, making it relatively less risky in the MLP sector. The company’s distributions have grown for several quarters and are expected to continue in 2016.

Investors are paid very solid 6.36% distribution. The Merrill Lynch price target is a huge $41. The consensus target is lower at $37.41. Shares closed Wednesday at $24.90.

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Martin Midstream Partners

This top stock is down an astonishing 50% from highs printed this time two years ago. Martin Midstream Partners L.P. (NASDAQ: MMLP) has a very diverse set of operations focused primarily in the United States Gulf Coast region. Its primary business lines include:

  1. Terminalling, storage and packaging services for petroleum products and by-products
  2. Natural gas liquids transportation and distribution services and natural gas storage
  3. Sulfur and sulfur-based products processing, manufacturing, marketing and distribution
  4. Marine transportation services for petroleum products and by-products

The company had a very strong second quarter for 2015. Cash flow from operations exceeded plan and the positive impact of stable cash flows from acquisitions made during 2014 helped to reduce the impact of seasonal cash flow swings that historically happen during the summer months.

Martin Midstream investors are paid a huge 13.25% distribution, which always could be trimmed. The Merrill Lynch price target is a whopping $42, and the consensus target is $34.25. Shares closed Wednesday at $24.40.

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It will take patience for these stocks to hit the lofty price targets that Merrill Lynch has set. With that in mind, there is every reason to believe that in 18 to 24 months these top companies could see much higher share prices, and in the meantime, investors can collect distributions and wait.

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