After a dreadful late-summer stretch, West Texas Intermediate crude oil has traded back over the $75 a barrel level and looks to be closing in $80, the highest in seven years, as OPEC has given every indication that it will be holding current production levels, with very moderate increases, to protect that $75 to $85 price point. While most of the shut-in Gulf of Mexico production has returned to 100% since Hurricane Ida, Permian Basin producers have continued to watch their production levels, as free cash flow is now the name of the game over production growth.

We screened our 24/7 Wall St. database looking for the best dividend-paying energy stocks and master limited partnerships (MLPs) rated Buy at major Wall Street firms and found four that are cheap and have some serious upside potential. We focused on companies based in the United States. While all four stocks are rated Buy, 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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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 company’s distributions have grown consistently over the years, and last year it announced that the board of directors of its general partner declared an increase in the quarterly cash distribution paid to partners to $0.45 per common unit, or $1.80 per unit on an annualized basis.

Investors in Enterprise Products Partners stock receive a 7.95% distribution. Morgan Stanley has a $30 price target, just above the $28.28 consensus target. Shares ended Tuesday trading at $23.10 apiece.

Exxon Mobil

Shares of this mega-cap energy leader backed up nicely as oil sold off in August, and it still offers investors an incredible entry point. Exxon Mobil Corp. (NYSE: XOM) is the world’s largest international integrated oil and gas company. It explores for and produces crude oil and natural gas in the United States, Canada, South America, Europe, Africa and elsewhere.

Exxon also manufactures and markets commodity petrochemicals, including olefins, aromatics, polyethylene and polypropylene plastics, and specialty products, and it transports and sells crude oil, natural gas and petroleum products.
The company announced last month that ExxonMobil Catalysts and licensing has introduced ExxonMobil Renewable Diesel (EMRD) process technology to help meet the evolving needs for mobility, while utilizing renewable feedstock. This new process technology converts feedstocks including, but not limited to, vegetable oils, unconverted cooking oil and animal fats, into renewable diesel. Due to significant interest in producing renewable jet fuel as a primary product, Exxon is also developing advanced catalyst and process technology solutions that will offer EMRD process licensees flexibility to tailor the amount of jet fuel versus diesel produced.

The dividend yield is 5.71%. The BofA Securities price target is $90, and the consensus target is much lower at $66.44. Exxon Mobil stock closed trading at $61.62 on Tuesday.
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MPLX

This is the top holding for the ALPS Alerian MLP ETF. 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.

MPLX is one of the bigger pipeline entities, with a market capitalization of nearly $30 billion, and the company repurchased a strong $155 million in units during the second quarter. The partnership currently has approximately $657 million remaining under its board authorization and that kind of buying by management tends to keep a bid under the stock price.

Investors receive a 9.34% distribution. The $33 Raymond James price target on MPLX stock is in line with the $33.06 consensus target. Tuesday’s closing share price was $29.21.

Valero Energy

This Wall Street favorite is a very solid energy play for investors who are more conservative. Valero Energy Corp. (NYSE: VLO) is one of the largest independent petroleum refining and marketing companies in the United States. It is based in San Antonio, Texas; owns 13 refineries in the United States, Canada and Europe; and has a total throughput capacity of around 2.5 million barrels per day.

Valero also is a joint venture partner in Diamond Green Diesel, which operates a renewable diesel plant in Norco, Louisiana. Diamond Green Diesel is North America’s largest biomass-based diesel plant.

Valero sells its products in the wholesale rack or bulk markets in the United States, Canada, the United Kingdom, Ireland and Latin America. Approximately 7,400 outlets carry Valero’s brand names.

Valero Energy stock comes with a 5.32% dividend. Wells Fargo is very bullish with a $102 price target. The consensus target is just $84.65, and shares closed on Tuesday at $74.30.

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One integrated mega-cap energy giant, a leading refiner, plus two top MLPs all make good sense for growth and income investors looking to add positions in energy but wanting to be cautious in what has turned into a very volatile market. Note that distributions from MLPs may contain return of principal.

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