Both Brent and West Texas Intermediate crude traded sideways to down for months before the summer move higher. While they are consolidating some now, many feel a move to $90 a barrel and higher is a distinct possibility. While it is unlikely oil will get back to the $120 mark, as it did in the summer of 2022, it is a good bet that both benchmarks could trade higher this fall.
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Income investors looking to the energy sector, which was the only sector to outperform in 2022, are often drawn to the energy master limited partnerships (MLPs), and with good reason. While they do tend to trade higher when the crude benchmarks do, their services to transport and store oil and gas are contract-based regardless of commodity pricing. With many contracts already set in place, fluctuations in benchmark pricing are not as significant as they are for exploration and production companies.
We screened our 24/7 Wall St. MLP research universe and found seven Buy-rated stocks paying huge distributions that look like great buys now. It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
Antero Midstream
With shares trading at just over $10 apiece, this well-run company offers a huge total return package. Antero Midstream Corp. (NYSE: AM) owns, operates and develops midstream energy infrastructure. It operates through two segments.
The Gathering and Processing segment includes a network of gathering pipelines and compressor stations that collects and processes production from Antero Resources’ wells in West Virginia and Ohio.
The Water Handling segment delivers fresh water and offers other fluid handling services, such as wastewater transportation, disposal and treatment, as well as high-rate transfer services.
Investors receive a 7.54% distribution. UBS has a $14 target price on Antero Midstream stock. Wall Street has a consensus target of $13.20, and Tuesday’s closing price was $12.28 per unit.
Energy Transfer
This top MLP is a safer play 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.
The company is a publicly traded limited partnership with core operations that include complimentary natural gas midstream, intrastate and interstate transportation and storage assets; crude oil, natural gas liquid (NGL) and refined product transportation and terminaling assets; NGL fractionation; and various acquisition and marketing assets.
After the purchase of Enable Partners in December of 2021, Energy Transfer owns and operates more than 114,000 miles of pipelines and related assets in all the major U.S. producing regions and markets across 41 states, further solidifying its leadership position in the midstream sector.
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.
Energy Transfer stock investors receive a 9.25% distribution. Morgan Stanley has set a $17 price target, and the consensus target is $17.29. Tuesday’s close was at $13.52.
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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 distribution yield here is 7.54%. The J.P. Morgan price target is $33, and Enterprise Products Partners stock has a $32.16 consensus target. Tuesday’s close was at $26.81.
Hess Midstream
This is the limited partnership midstream arm of one of the country’s top energy companies. Hess Midstream L.P. (NYSE: HESM) owns, develops, operates and acquires midstream assets. The company operates through three segments.
The Gathering segment owns natural gas gathering and crude oil gathering systems, as well as produced water gathering and disposal facilities. Its gathering system consists of approximately 1,350 miles of high- and low-pressure natural gas and natural gas liquids gathering pipelines with capacity of approximately 450 million cubic feet per day, and the crude oil gathering system comprises approximately 550 miles of crude oil gathering pipelines.
The Processing and Storage segment comprises Tioga Gas Plant, a natural gas processing and fractionation plant located in Tioga, North Dakota; a 50% interest in the Little Missouri 4 gas processing plant located in south of the Missouri River in McKenzie County, North Dakota; and Mentor Storage Terminal, a propane storage cavern and rail, and truck loading and unloading facility located in Mentor, Minnesota.
The Terminaling and Export segment owns Ramberg terminal facility; Tioga rail terminal; and crude oil rail cars, as well as Johnson’s Corner Header System, a crude oil pipeline header system.
Hess Midstream stock comes with a 7.92% distribution. The $36 UBS price target is higher than the $34.83 consensus target and Tuesday’s close at $29.07.
24/7 Wall St.MPLX
This is the top holding for the Alerian MLP energy exchange-traded fund. MPLX L.P. (NYSE: MPLX) is primarily engaged in crude oil and refined products transportation and terminaling in the U.S. Midwest and Gulf Coast regions, as well as natural gas gathering and processing in the northeast from its prior acquisition of MarkWest Energy in 2015. MPLX was formed by independent U.S. refiner Marathon Petroleum.
The company’s assets include a network of crude oil and refined product pipelines; an inland marine business; light-product terminals; storage caverns; refinery tanks, docks, loading racks and associated piping; and crude and light-product marine terminals. It also owns crude oil and natural gas gathering systems and pipelines, as well as natural gas and NGL processing and fractionation facilities in key U.S. supply basins.
Investors receive an 8.87% distribution. MPLX stock has a $44 price target at Raymond James. The $40.33 consensus target is a little closer to Tuesday’s closing price of $35.00.
Plains All American Pipeline
This stock has been locked in a tight trading range and looks ready to break out. Plains All American Pipeline L.P. (NYSE: PAA) engages in the pipeline transportation, terminaling, storage and gathering of crude oil and NGLs in the United States and Canada. The company operates through two segments.
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Its Crude Oil segment offers gathering and transporting of crude oil through pipelines, gathering systems, trucks and at times on barges or railcars. This segment provides terminaling, storage and other facilities-related services, as well as merchant activities.
The Natural Gas Liquids segment provides gathering, fractionation, storage, transportation and terminaling activities. This segment is also involved in ethane, propane, normal butane, iso-butane and natural gasoline, as well as crude oil refining processes.
The distribution yield is 7.05%. The $18 target price at Raymond James accompanies a Strong Buy rating. The consensus target is $16.91, and Plains All American Pipeline stock ended Tuesday trading at $15.21.
24/7 Wall St.Sunoco
This well-known company could be the best buy for investors who are more conservative. Sunoco L.P. (NYSE: SUN) distributes and retails motor fuels in the United States. The company operates in two segments.
The Fuel Distribution and Marketing segment purchases motor fuel from independent refiners and oil companies and supplies it to independently operated dealer stations, distributors and other consumers of motor fuel, and partnership operated stations, as well as to commission agent locations.
The All Other segment operates retail stores that offer motor fuel, merchandise, foodservice and other services that include credit card processing, car washes, lottery, automated teller machines, money orders, prepaid phone cards and wireless services. It also leases and subleases real estate properties and operates terminal facilities on the Hawaiian Islands. As of December 31, 2020, the company operated 78 retail stores in Hawaii and New Jersey.
Sunoco stock investors receive a 7.53% distribution. The Raymond James target price is $53. The consensus target is $50.86. The final trade on Tuesday was reported at $45.42.
These seven major players in the energy infrastructure arena offer safe and reliable distributions. Investors looking for solid total return potential can do well owning these MLP leaders.
It is important to note that MLP distributions may contain return of principal. Those looking to avoid the pesky K-1s can always purchase shares in the ALPS Alerian MLP ETF (NYSE: AMLP). Investors receive a 1099 instead of a K-1.
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