One has to have been asleep for the past year to have missed the huge rise in oil and gasoline prices that has become one of the biggest burdens that millions of Americans face each day. The average price for a gallon of gas in the United States now is $4.22. For diesel, which powers almost all the trucks that transport goods across the nation, the price is a stunning $5.43. Those big increases are one reason that inflation could approach double-digit levels this summer, before leveling off later this year or early in 2023.
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Investors who hopped on the energy train a year ago have reaped the benefits of the price surges, and despite belated efforts by the White House such as releasing oil from the Strategic Petroleum Reserve, many across Wall Street feel the high prices may be here for some time.
Truist Financial recently resumed coverage on some of the top energy master limited partnerships (MLPs), and we screened the list looking for those stocks with the highest dividend yields. These five still look very attractive, despite the big run higher over the past year.
While the Truist team has a Buy rating on all five of these top stocks, 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 | EPD Price Prediction) provides a wide variety of midstream energy services, including gathering, processing, transportation and storage of natural gas, natural gas liquids (NGL) 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 master limited partnerships.
Enterprise Products Partners stock investors receive a 7.12% distribution. Truist’s price target is $27, while the consensus target is up at $30.57. Shares closed on Thursday at $26.61.
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Kinder Morgan
This is another of the top energy stocks, and it remains a favorite across Wall Street. Kinder Morgan Inc. (NYSE: KMI) operates as an energy infrastructure company in North America. The company operates through the following segments.
The Natural Gas Pipelines segment owns and operates interstate and intrastate natural gas pipelines and underground storage systems; natural gas gathering systems and natural gas processing and treating facilities; natural gas liquids fractionation facilities and transportation systems; and liquefied natural gas liquefaction and storage facilities.
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The Products Pipelines segment owns and operates refined petroleum products and crude oil and condensate pipelines, as well as associated product terminals and petroleum pipeline transmix facilities.
The Terminals segment owns or operates liquids and bulk terminals that store and handle various commodities, including gasoline, diesel fuel, chemicals, ethanol, metals and petroleum coke. It also owns tankers.
The CO2 segment produces, transports and markets CO2 to recover and produce crude oil from mature oil fields, and it owns interests in or operates oil fields and gasoline processing plants, as well as operates a crude oil pipeline system in West Texas. It owns and operates approximately 83,000 miles of pipelines and 144 terminals.
Shareholders receive a 5.94% dividend. The Truist target price for Kinder Morgan stock is $22. That compares with a $20.26 consensus target and Thursday’s close at $18.85 a 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’s assets include a network of crude oil and refined product pipelines; an inland marine business; light-product terminals; storage caverns; refinery tanks, docks, loading racks and associated piping; and crude and light-product marine terminals. It also owns crude oil and natural gas gathering systems and pipelines, as well as natural gas and NGL processing and fractionation facilities in key U.S. supply basins.
Investors receive an 8.66% distribution. Truist has set a $37 price target. MPLX stock has a $38 consensus target, and Thursday’s closing share price was $32.39.
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ONEOK
The solid price of natural gas over the past year has helped to lift this top energy company. ONEOK Inc. (NYSE: OKE) primarily engages in natural gas transportation, storage and natural gas and NGLs gathering, processing and fractionation in the Bakken, Mid-Continent and Permian. The company recently closed the roll-up of its underlying MLP, ONEOK Partners.
The company has a strong presence in the Oklahoma SCOOP/STACK (NGL gathering/takeaway system, G&P), the Williston Basin (G&P, NGL takeaway) and the Permian Basin (NGL gathering, NGL takeaway, natural gas takeaway), which analysts feel provides high-return growth opportunities.
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Many on Wall Street remain very positive on the company’s primarily fee-based earnings, which account for 90% of total earnings.
Investors receive a 5.74% dividend. The $78 Truist price target is well above the $71.50 consensus target. ONEOK stock closed almost 5% lower on Thursday at $64.05.
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Williams Companies
This top energy company is a solid pick for investors who are more conservative and looking for exposure to LNG. Williams Companies Inc. (NYSE: WMB) operates as an energy infrastructure company primarily in the United States.
Its Transmission & Gulf of Mexico segment comprises Transco and Northwest natural gas pipelines, as well as natural gas gathering and processing, and crude oil production handling and transportation assets in the Gulf Coast region. The Northeast G&P segment engages in the midstream gathering, processing and fractionation activities in the Marcellus Shale region, primarily in Pennsylvania and New York, and the Utica Shale region of eastern Ohio.
The West segment comprises gas gathering, processing and treating operations in the Rocky Mountain region of Colorado and Wyoming, the Barnett Shale region of north-central Texas, the Eagle Ford Shale region of South Texas, the Haynesville Shale region of northwest Louisiana and the Mid-Continent region, which includes the Anadarko, Arkom, and Permian basins. It also includes NGL and natural gas marketing operations, as well as storage facilities.
The company owns and operates 30,000 miles of pipelines, 34 processing facilities, nine fractionation facilities and approximately 23 million barrels of NGL storage capacity.
Holders of Williams Companies stock receive a 4.81% dividend. Truist has a $37 price objective. The consensus target is $37.30, and shares closed at $35.9 on Thursday.
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While these top companies have had solid runs higher over the last year, given the strong and dependable distributions, and the potential for even more price share gains, they are outstanding ideas for growth and income investors looking for total return potential in a market that remains very stretched.
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