There are two things now that are keeping many energy and income investors from buying master limited partnerships (MLPs) at today’s bargain basement prices: the threat of those MLPs having to cut their distribution, and the almost worst threat of them having to raise capital and add dilution into the mix.

In a recent report, Jefferies found three top companies that may be outstanding buys for investors as they don’t need to raise capital and could be somewhat insulated from further downward selling pressure. The energy sector in general is still under massive duress, but scaling in some capital to these solid companies could make sense at current levels.

Keep in mind that MLP distributions can contain return of capital.

AmeriGas Partners

This stock is a solid play on the propane industry. AmeriGas Partners L.P. (NYSE: APU) has the advantage of having a very large propane footprint. Propane usually trades at almost twice the price of spot natural gas. The consumer is often in rural or outlying areas where there is no major competition to speak of.

AmeriGas operates as a retail and wholesale distributor of propane gas and related equipment and supplies in the United States. It serves approximately 2 million residential, commercial, industrial, agricultural, wholesale and motor fuel customers in 50 states through approximately 2,500 propane distribution locations.

The stock has been sold off pretty hard, and the Jefferies team still views this as a very solid buying opportunity. They also point out that unlike other MLPs, this company is not constantly going to the equity markets to raise capital, and that is a big plus for unitholders, given the current very difficult situation in the energy sector.

AmeriGas investors are paid a very rich 11.06% distribution. The Jefferies price objective for the stock is $52, and the Thomson/First Call consensus price target is $50. AmeriGas shares closed Monday’s trading at $33.26.
Enterprise Products Partners

This is one of the largest publicly traded partnerships and a leading North American provider of midstream energy services to producers and consumers. Enterprise Products Partners L.P. (NYSE: EPD) once again, despite the energy slump, just raised its distribution 1%. The company maintains a very good long-term position in the market. It provides many of its services on the basis of long-term, fixed-fee contracts, insulating against some of the wilder swings of the commodities that it trades in.

One reason why many analysts may have a liking for the stock might be its distribution coverage ratio. The company’s distribution coverage ratio is well above one times, making it relatively less risky among the MLPs. Enterprise Products Partners’ distributions have grown for several quarters and are expected to continue in 2016. Plus the Standard & Poor’s current rating is BBB+, which is investment grade, and the outlook is stable.

Investors are paid very solid 6.95% distribution. The Jefferies price target is $36, but the consensus target is higher at $38.70. Shares closed Monday at $22.16.

Spectra Energy Partners

This company has posted very solid earnings and looks to continue raising distributions. Spectra Energy Partners L.P. (NYSE: SEP) is one of the largest pipeline MLPs in the United States and connects growing supply areas to high-demand markets for natural gas, natural gas liquids and crude oil. These assets include more than 17,000 miles of transmission and gathering pipelines, approximately 170 billion cubic feet of natural gas storage and approximately 4.8 million barrels of crude oil storage.

Along with the solid second- and third-quarter earnings, the company declared a quarterly cash distribution to unitholders of $0.61375 per unit, an increase of 1.25 cents over the previous level of $0.60125 per unit back in August. This is the 31st consecutive quarter that Spectra Energy Partners has increased its quarterly cash distribution. The stock is also investment grade rated BBB with a stable outlook at S&P.

Spectra Energy investors receive a very solid 6.5% distribution. The consensus target price is $53.54. The shares closed Monday at $38.52.

The Jefferies analysts have found three companies that could be outstanding additions to portfolios now. The last thing Wall Street wants to see from any MLPs now is a capital raise, because regardless of the need, the analysts and investors will view any raise with a very wary eye.

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