The stock market has always been known to shoot first and ask questions later, and that’s precisely what happened when President Trump’s tariffs on China, Mexico, and Canada kicked in. While a 30-day reprieve was granted to Canada and Mexico, China pushed back at once with restrained tariffs. Worries that inflation will get a fresh start by the move and retaliation from the three countries were cited as just a couple of the reasons for a dramatic stock sell-off around the world; however, one of the realities that few are talking about is the fact that the stock market, especially in the United States is very overbought, and likely more than ready for a sizable correction.
Over the past few years, the energy trade has often been considered an old-school relic. Still, as we have discovered, the much-hyped electric vehicle revolution has not arrived and will likely never dominate the industry. Current spot pricing for the black gold has been locked in a trading range of $70 to $80 over the past year, and it was reported recently that hedge funds, while still long the benchmarks, are shorting gasoline and distillate futures. This is while OPEC has decided to keep their production cuts in place in 2025.
One of the best ideas for investors worried about the Trump tariffs and looking to add energy to their portfolios at current pricing is master limited partnerships, or MLPs. They pay big and dependable dividends, and many energy master limited partnerships are midstream companies that control the movement or storage of oil and natural gas via contract pricing with the big oil producers.
We screened our 24/7 Wall St. MLP research database, looking for top companies that pay high-yielding distributions to their shareholders. Four top companies hit our screen, including a 2023 initial public offering, and all are set to pay shareholders incredibly large and dependable distributions.
Why do we cover energy MLPs
High-yield energy MLPs offer safe and reliable distributions and are significant players in the energy infrastructure arena. Those looking for solid total return potential can do well owning these and other MLP leaders. It’s important to note that MLP distributions may contain a return of principal. Those looking to avoid the pesky K-1s can always purchase shares in the ALPS Alerian MLP ETF (NYSE: AMLP | AMLP Price Prediction), which pays a solid 7.30% dividend. Investors receive a 1099 instead of a K-1.
Enterprise Products Partners
Enterprise Products Partners is one of the biggest publicly traded partnerships.
This company is one of the largest publicly traded energy partnerships and pays a 6.55% dividend. Enterprise Products Partners L.P. (NYSE: EPD) provides various midstream energy services, including:
- Gathering
- Processing
- Transporting and storing natural gas, natural gas liquids (NGL) fractionation
- Import and export terminalling
- Offshore production platform services
The company has four reportable business segments:
- Natural Gas Pipelines and Services
- NGL Pipelines and Services
- Petrochemical Services
- Crude Oil Pipelines and Services
One reason many analysts may like the stock is its distribution coverage ratio. The company’s coverage ratio is well above 1x, making it relatively less risky in the MLP sector.
Hess Midstream
Hess Midstream is a fee-based, growth-oriented midstream company that owns, operates, and develops diverse midstream assets.
This is the limited partnership midstream arm of one of the country’s top energy companies, which is being purchased by Chevron Corp. (NYSE: CVX) and pays a stellar 6.69% dividend. Hess Midstream L.P. (NYSE: HESM) owns, develops, operates, and acquires midstream assets.
The company operates through three segments:
- Gathering
- Processing and Storage
- Terminating and exporting
The gathering segment owns natural gas gathering and crude oil gathering systems and produces 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 a capacity of about 450 million cubic feet per day
- 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
- 50% interest in the Little Missouri 4 gas processing plant located south of the Missouri River in McKenzie County, North Dakota
- 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 the Ramberg terminal facility, Tioga rail terminal, crude oil rail cars, Johnson’s Corner Header System, and a simple oil pipeline header system.
Mach Natural Resources
Mach Natural Resources is an independent upstream oil and gas company that acquires, develops, and produces oil, natural gas, and NGL.
This 2023 IPO is trading below the initial price. Mach Natural Resources (NYSE: MNR) conducted a secondary offering last year to purchase even more producing assets, which will help pay a 14.8% dividend.
Mach Natural Resources is an independent upstream oil and gas company focused on acquiring, developing, and producing oil, natural gas, and natural gas liquids reserves in the Anadarko Basin region of Western Oklahoma, southern Kansas, and the Texas panhandle.
The analysts at Raymond James noted that Mach is led by Tom Ward, Co-Founder of Chesapeake Energy. Mach is another entrant into the E&P MLP space. It is a pure-play operator in the Anadarko Basin, leveraging its strong position (1 million net acres) to become the primary consolidator in the region.
Mach’s midstream position and lower base decline (~20%) allow the company to target a lower reinvestment rate (~30%) relative to the overall industry. In addition, it is one of the only exploration and production companies organized as a limited partnership as it is an oil and gas producer.
USA Compression Partners
USA Compression Partners provides natural gas compression services under term customer contracts.
While perhaps less known than their peers, this top company pays shareholders a hefty 7.88% dividend. USA Compression Partners L.P. (NYSE: USAC) provides natural gas compression services.
The company offers compression services to:
- Oil companies and independent producers
- Processors
- Gatherers
- Transporters of natural gas and crude oil, as well as operating stations
USA Compression Partners primarily provides natural gas compression services to infrastructure applications, including centralized natural gas gathering systems, processing facilities, and gas lift applications for crude oil wells.
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