The current uncertain geopolitical circumstances, growing oil and gas demand & supply operations, and the latest technologies are propelling the market outlook of the midstream energy industry, and the growth is expected to continue in the upcoming period.
Given the industry tailwinds, it could be wise to invest in fundamentally sound midstream energy stocks MPLX LP (MPLX), Enterprise Products Partners L.P. (EPD), and Western Midstream Partners LP (WES), offering strong dividend yield.
Midstream entities like master limited partnerships (MLP) are publicly traded limited partnerships, combining the tax benefits of a private partnership and the liquidity of a publicly traded company. They generally enjoy stable cash flows and are required to distribute a set amount of cash to their investors, hence benefiting investors with high dividend yields.
The midstream energy segment is currently poised for robust growth with their ever-expanding role in the market through activities like transporting, storing, and distributing, facilitating the movement of products. The activities in the segment are continuously growing with surging energy demand globally, changing geopolitical dynamics, and technological advancements.
The global midstream oil and gas market is expected to project growth at a CAGR of 3.2%, resulting in a market volume of $41.44 billion by 2029. Increasing economic activities and the production and consumption of natural gas and refined petroleum products currently drive the market.
Amid this growth, investors could benefit from investing in companies and MLPs operating in the midstream energy market, which are currently evidencing solid demand and offering stable revenue through dividend payments to investors.
Considering these industry factors, let’s delve into the fundamentals of the top high-yield MLPs – Oil & Gas stocks, beginning with the third choice.
Stock #3: MPLX LP (MPLX)
MPLX primarily owns and operates midstream energy infrastructure and logistics assets. The company operates through Logistics and Storage and Gathering and processing segments.
On October 29, MPLX’s board of directors declared a quarterly cash distribution of $0.9565 per common unit for the third quarter of 2024, which reflects a 12.5% increase, or $0.1065 increase per common unit, from the second quarter of 2024 distribution. The distribution is to be paid on November 15, 2024, to common unitholders of record as of November 8, 2024.
MPLX pays an annual dividend of $3.83, which translates to a yield of 8.43% at the current share price. Its four-year average dividend yield is 9.54%. Also, the company’s dividend payouts have increased at a CAGR of 7.3% over the past three years. MPLX has raised its dividends for 10 consecutive years.
MPLX’s total revenues and other income increased 2.1% year-over-year to $2.97 billion during the third quarter that ended September 30, 2024. The company’s income from operations grew 10.5% from the previous year’s period to $1.28 billion. Also, net income attributable to MPLX totaled $1.04 billion and $1.01 per limited partner unit, up 13% and 13.5% year-over-year, respectively.
Furthermore, adjusted EBITDA attributable to MPLX LP rose 7.4% from the prior-year quarter to $1.71 billion.
Analysts expect MPLX’s revenue and EPS for the fourth quarter (ending December 2024) to increase 5.9% and 8.2% year-over-year to $3.14 billion and $1.05, respectively. Also, the company has surpassed the consensus EPS estimates in three of the trailing four quarters.
Shares of MPLX have surged 12.5% over the past six months and 29.8% over the past year to close the last trading session at $46.44.
MPLX’s POWR Ratings reflect its robust outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
MPLX has an A grade for Stability. It also has a B grade for Quality, Sentiment, and Momentum. It is ranked #6 out of 23 stocks in the A-rated MLPs – Oil & Gas industry.
In addition to the POWR Ratings we’ve stated above, we also have other ratings for MPLX. Get all MPLX ratings here.
Stock #2: Enterprise Products Partners L.P. (EPD)
EPD offers midstream energy services to producers and consumers of natural gas, natural gas liquids (NGLs), crude oil, petrochemicals, and refined products. The company operates in NGL Pipelines & Services; Crude Oil Pipelines & Services; Natural Gas Pipelines & Services; and Petrochemical & Refined Products Services segments.
On October 29, EPD completed of the second phase of its Texas Western Products system. Located in Grand County, Utah, the facility is a refined products truck terminal serving the Grand Junction, Colorado, and Moab, Utah, areas. It has a storage capacity of 400,000 barrels for gasoline and diesel and can load trucks at a rate of up to 20,000 bpd.
On October 28, EPD completed the acquisition of Piñon Midstream, LLC. EPD purchased Piñon Midstream for $950 million in cash consideration as part of a debt-free transaction. The assets acquired under the transaction, including natural gas gathering and treating services, will expand EPD’s footprint in the eastern flank of the prolific Delaware Basin of Texas and New Mexico.
Also, on October 2, EPD’s board of directors declared a quarterly cash distribution for the third quarter of 2024 of $0.525 per unit. The distribution will be paid on November 14, 2024, to common unitholders of record as of the close of business on October 31, 2024. This distribution represents a 5% increase from the distribution declared within the third quarter of 2023.
EPD pays an annual dividend of $1.16, which translates to a yield of 2.60% at the current share price. Its four-year average dividend yield is 1.97%. Moreover, the company’s dividend payouts have increased at a CAGR of 17.4% over the past three years. Kroger has raised its dividends for 16 consecutive years.
During the third quarter of 2024, which ended on September 30, 2024, EPD's total revenues grew 14.8% from the year-ago value to $13.78 billion. Its operating income increased 5% year-over-year to $1.78 billion. The company’s net income attributable to common unitholders came in at $1.42 billion and $0.65 per unit, reflecting growth of 7.5% and 8.3% from the prior year’s quarter, respectively.
Furthermore, the company’s adjusted EBITDA rose 4.9% from the year-ago value to $2.44 billion. And its non-GAAP free cash flow rose 4.3% from the prior-year quarter to $907 million.
Analysts expect EPD’s revenue and EPS for the first quarter (ending March 2025) to increase marginally and 4.5% year-over-year to $14.85 billion and $0.70, respectively. Further, the company has surpassed the consensus EPS estimates in three of the four trailing quarters.
Over the past six months, EPD’s stock has gained 5.6% and 13.5% over the past year to close the last trading session at $29.97.
EPD’s robust outlook is reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
The stock has a B grade for Momentum, Value, and Stability. Within the same industry, EPD is ranked #4 of 23 stocks.
Click here to access other ratings of EPD for Growth, Sentiment, and Quality.
Stock #1: Western Midstream Partners, LP (WES)
WES operates as a midstream energy company. The company is involved in gathering, compressing, treating, processing, and transporting natural gas. It also gathers, stabilizes, and transports condensate, natural gas liquids (NGLs), and crude oil and engages in the gathering and disposing of produced water.
On October 17, WES’ board of directors declared a quarterly cash distribution of $0.875 per unit for the third quarter of 2024, or $3.50 on an annualized basis. The distribution is payable on November 14, 2024, to unitholders of record at the close of business on November 1, 2024.
WES’ annual distribution translates to a yield of 9.27% on the current share price. Its four-year average yield is 7.22%. The company’s dividend payouts have grown at a CAGR of 36.2% over the past three years.
For the third quarter that ended September 30, 2024, WES reported total revenues and other of $883.36 million, up 13.8% year-over-year. Its operating income was $395.87 million, indicating a growth of 9.7% from the prior year's quarter. The company’s net income attributable to WES grew 4% and 5.7% from the year-ago value to $288.48 million and $0.74 per common unit, respectively.
Analysts expect WES’ revenue for the fourth quarter (ending December 2024) to increase 11% year-over-year to $952.42 million. The consensus EPS estimate for the same period of $0.89 indicates a 20.7% year-over-year growth. Moreover, the company surpassed the consensus EPS estimates in three of the trailing four quarters.
WES’ stock has surged 8.1% over the past six months and 36.1% over the past year to close the last trading session at $38.53.
WES’ POWR Ratings reflect its bright prospects. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
WES has a B grade for Stability, Momentum, and Quality. The stock is ranked #3 among 23 stocks in the A-rated MLPs – Oil & Gas industry.
To access WES’ other ratings for Sentiment, Growth, and Value, click here.
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EPD shares were unchanged in after-hours trading Thursday. Year-to-date, EPD has gained 23.47%, versus a 26.49% rise in the benchmark S&P 500 index during the same period.
About the Author: Rjkumari Saxena
Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.
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