Energy Business

4 Red-Hot Energy MLPs Offer Huge Dividends and Solid Upside Potential

Brent crude hit the $80 a barrel level for the first time since 2018 this week, and West Texas Intermediate isn’t far behind, trading just below $75. In addition, natural gas is closing in on $5.50 per million Btu and is hitting all-time highs in Europe. Despite the constant climate change arguments, the fact of the matter is that the internal combustion engine is not going away anytime soon. In addition, despite the constant chatter over electric vehicles, there is one issue rarely discussed: They need electricity, which requires power generation, which in many cases requires natural gas.

Many investors are staring at the high commodity prices and wondering what is the best way to play the energy sector. For those that need solid income and the potential for growth, the best way may be via energy master limited partnerships (MLPs). BofA Securities just resumed coverage on the MLP arena, and we found five that pay massive distributions and are rated Buy. It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

Energy Transfer

This top MLP is a very safe way for investors looking for energy exposure and income. Energy Transfer L.P. (NYSE: ET) owns and operates one of the largest and most diversified portfolios of energy assets in the United States, with a strategic footprint in all the major domestic production basins.

This publicly traded limited partnership has core operations that include complimentary natural gas midstream, intrastate and interstate transportation and storage assets; crude oil, natural gas liquids (NGLs) and refined product transportation and terminaling assets; NGL fractionation; and various acquisition and marketing assets.

Through its ownership of Energy Transfer Operating, formerly known as Energy Transfer Partners, the company also owns Lake Charles LNG, as well as the general partner interests, the incentive distribution rights and 28.5 million common units of Sunoco, and the general partner interests and 39.7 million common units of USA Compression Partners.

Investors receive a 6.37% distribution. The BofA Securities price target is $14, while the consensus target is $13.88. The shares closed on Wednesday at $9.58.

Enterprise Products Partners

This is the largest publicly traded energy partnership and a leading North American provider of midstream energy services to producers and consumers. Enterprise Products Partners L.P. (NYSE: EPD) provides a wide variety of midstream energy services, including gathering, processing, transportation and storage of natural gas, NGL fractionation, import and export terminaling, and offshore production platform services.

One reason many analysts may have a liking for the stock might be its distribution coverage ratio. This ratio is well above 1 times, making it relatively less risky among the MLPs.