After a dreadful late-summer stretch, West Texas Intermediate crude oil has traded back over the $75 a barrel level and looks to be closing in $80, the highest in seven years, as OPEC has given every indication that it will be holding current production levels, with very moderate increases, to protect that $75 to $85 price point. While most of the shut-in Gulf of Mexico production has returned to 100% since Hurricane Ida, Permian Basin producers have continued to watch their production levels, as free cash flow is now the name of the game over production growth.
We screened our 24/7 Wall St. database looking for the best dividend-paying energy stocks and master limited partnerships (MLPs) rated Buy at major Wall Street firms and found four that are cheap and have some serious upside potential. We focused on companies based in the United States. While all four stocks 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.
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, natural gas liquids 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.
The company’s distributions have grown consistently over the years, and last year it announced that the board of directors of its general partner declared an increase in the quarterly cash distribution paid to partners to $0.45 per common unit, or $1.80 per unit on an annualized basis.
Investors in Enterprise Products Partners stock receive a 7.95% distribution. Morgan Stanley has a $30 price target, just above the $28.28 consensus target. Shares ended Tuesday trading at $23.10 apiece.
Shares of this mega-cap energy leader backed up nicely as oil sold off in August, and it still offers investors an incredible entry point. Exxon Mobil Corp. (NYSE: XOM) is the world’s largest international integrated oil and gas company. It explores for and produces crude oil and natural gas in the United States, Canada, South America, Europe, Africa and elsewhere.
Exxon also manufactures and markets commodity petrochemicals, including olefins, aromatics, polyethylene and polypropylene plastics, and specialty products, and it transports and sells crude oil, natural gas and petroleum products.