Energy Business

Why Energy MLPs May Be the Buy of the Decade Now


This company reported very solid numbers but may be more off the radar for some investors. MPLX L.P. (NASDAQ: MPLX) is a diversified, growth-oriented MLP formed in 2012 by Marathon Petroleum to own, operate, develop and acquire midstream energy infrastructure assets. It is engaged in the gathering, processing and transportation of natural gas; the gathering, transportation, fractionation, storage and marketing of NGLs; and the transportation and storage of crude oil and refined petroleum products.

Despite the issues from the FERC ruling, the company has posted strong results and also announced that capital expenditures for 2018 would be right at $2.2 billion, which was above Wall Street estimates.

MPLX unitholders receive a 6.87% distribution. The $45 Raymond James price target compares with the consensus target of $41.94 and the most recent close at $36.52.

Targa Resources

This top energy MLP has had a string of positives lately. Targa Resources Corp (NYSE: TRGP) is a leading provider of midstream services and is one of the largest independent midstream energy companies in North America. Targa owns, operates, acquires and develops a diversified portfolio of complementary midstream energy assets.

The company is primarily engaged in the business of gathering, compressing, treating, processing and selling natural gas; storing, fractionating, treating, transporting and selling NGLs and NGL products, including services to liquefied petroleum gas exporters; gathering, storing and terminaling crude oil; storing, terminaling and selling refined petroleum products.

Targa Resources has one of the premier asset positions in the Permian basin. With solid management, a strong balance sheet and attractive exposure to some of the most attractive U.S. energy basins, it remains a top pick for 2018 at Raymond James and across Wall Street.

Investors receive a 7.06% distribution. Raymond James has a price objective of $56. The consensus target is $54.75, and shares closed Wednesday at $51.59.

Williams Partners

This is yet another top company that shines as solid income play. Williams Partners L.P. (NYSE: WPZ) is an industry-leading, large-cap MLP with operations across the natural gas value chain from gathering, processing and interstate transportation of natural gas and natural gas liquids to petchem production of ethylene, propylene and other olefins.

With major positions in top U.S. supply basins and also in Canada, Williams Partners owns and operates more than 33,000 miles of pipelines systemwide — including the nation’s largest volume and fastest growing pipeline — providing natural gas for clean-power generation, heating and industrial use. Its operations touch approximately 30% of U.S. natural gas.

Investors are paid a 5.59% distribution. Raymond James has set its price target at $46. The consensus target is $46.28, and shares closed on Wednesday at $44.75.

While it is important to remember that MLP distributions can still contain return of capital, these top stocks remain solid picks in a low-yield environment, especially when you consider the underperformance of energy MLPs during the first half of 2018.