Oil has been somewhat range-bound as we head into summer in a few weeks, but the good thing for most oil producers is that over $60 a barrel, and closing in on $70, most are able to wring out very solid profits at these levels. The good news for investors is that the top energy master limited partnerships (MLPs) offer a safer way to play the sector and also pay out some sizable distributions.
We screened our 24/7 Wall St. energy research database looking for the highest yielding energy MLPs that also have Buy ratings (more or less) from major Wall Street firms. These four stocks look extremely attractive now, especially for frustrated income investors that have a higher risk tolerance.
It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
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Antero Midstream
Trading just over $10, this very well-run company offers a huge total return package. Antero Midstream Corp. (NYSE: AM | AM Price Prediction) 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 giant 8.78% distribution. Wells Fargo has just an Equal Weight rating, but its $9 price target is a bit higher than the Wall Street consensus target of $8.94. Note though that Antero Midstream stock closed on Monday at $10.25 per share.
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 reported solid first-quarter financial results, with $739 million in net income while adjusted EBITDA was $1.4 billion. The company generated $1.1 billion in net cash from operating activities. Its chief executive officer said at the time that the company is eyeing share buybacks, but those will depend on market conditions.
MPLX stock investors receive a 9.40% distribution. Barclays has an Overweight rating and recently raised the price target $32 from $29. That compares with the lower $31.07 consensus target and a Monday’s closing print of $29.24.
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Natural Resource Partners
This off-the-radar stock is more of a hybrid holding, but it also holds a huge total return potential. Natural Resource Partners L.P. (NYSE: NRP) owns, manages and leases a portfolio of mineral properties in the United States.
The company owns interests in coal, soda ash, trona and other natural resources. Its coal reserves are primarily located in Appalachia, the Illinois Basin and the Northern Powder River Basin in the United States. Its industrial minerals and aggregates properties are located in the United States, oil and gas royalty assets located in Louisiana, timber assets located in West Virginia and trona ore mining operation and soda ash refinery are located in the Green River Basin, Wyoming.
The company leases a portion of its reserves in exchange for royalty payments, and it owns and leases transportation and processing infrastructure related to coal properties.
Investors will gladly accept the 8.85% distribution. Benchmark’s Buy rating comes with an $18 price target. The consensus target is $15, but Monday’s closing print was $20.36.
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Sunoco
This well-known company could be the best buy from more conservative investors. 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.
Investors receive 8.96% distribution. Barclay’s just raised the price target to $37 from $36 and has an Overweight rating. The posted consensus target is $35.67, and Sunoco stock closed on Monday at $36.85 a share.
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These four top companies offer reasonably safe and reliable distributions, plus are they major players in the energy infrastructure arena. 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.
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