One of the most troubling aspects to the worst inflation in 40 years is that while prices go up almost unabated, income does not. Seniors on Social Security will get a massive 9% increase this year, but what about those who won’t? Treasury debt yields have risen, but the long 30-year benchmark bond yields 4.27%, which will not match 8.1% inflation. So what are income investors to do, especially those with a higher risk tolerance? One idea is energy master limited partnerships (MLPs).
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With oil prices retreating almost 20% from highs printed earlier this year, but demand still huge, some energy MLPs have backed up big time and are offering some of the best entry points for income investors this year. We screened our 24/7 Wall St. MLP research universe and found four quality stocks that pay huge distributions that look like great buys now.

CrossAmerica Partners

This company keeps gas stations and convenience stores filled up with gasoline. CrossAmerica Partners L.P. (NYSE: CAPL) engages in the wholesale distribution of motor fuels, operation of convenience stores and ownership and leasing of real estate used in the retail distribution of motor fuels in the United States.

The Wholesale segment engages in the wholesale distribution of motor fuels to lessee dealers, independent dealers, commission agents and company-operated retail sites. The Retail segment is involved in the sale of convenience merchandise items, as well as retail sale of motor fuels at company-operated retail sites and retail sites operated by commission agents. As of December 31, 2021, the company distributed motor fuel on a wholesale basis to approximately 1,750 sites located in 34 states, and it owned or leased approximately 1,150 sites. CrossAmerica GP operates as the general partner of the company.

Investors receive an 11.33% distribution. The stock has traded in a 52-week range of $18.32 to $23.29, and shares closed on Friday at $18.53.

Dorchester Minerals

This is one of the top royalty plays on Wall Street. Dorchester Mineral L.P. (NASDAQ: DMLP) engages in the acquisition, ownership and administration of producing and non-producing natural gas and crude oil royalty, net profit and leasehold interests in the United States.

The company’s royalty properties consist of producing and non-producing mineral, royalty and overriding royalty interests located in 582 counties and parishes in 26 states. Its net profits interests represent net profits overriding royalty interests in various properties owned by the operating partnership. Dorchester Minerals Management serves as the general partner.

Last month the company announced the successful consummation of a notable lease transaction in the Midland Basin. On September 30, 2022, the partnership leased 243 net acres in two tracts of land in Reagan County, Texas, for $30,000 per acre and a 25% royalty. The resulting lease bonus payment of approximately $7.3 million will be included in the partnership’s third-quarter distribution to unitholders.

Investors receive a 12.32% distribution. The shares have traded in a 52-week range of $17.10 to $32.61. The stock closed Friday’s trading session at $28.39.

This is another royalty idea that makes sense for investors now. Kimbell Royalty Partners L.P. (NYSE: KRP) acquires and owns mineral and royalty interests in oil and natural gas properties in the United States.
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As of December 31, 2021, it owned mineral and royalty interests in approximately 11.4 million gross acres and overriding royalty interests in approximately 4.7 million gross acres. The company’s mineral and royalty interests are located in 28 states and include ownership in approximately 122,000 gross wells, including approximately 46,000 wells in the Permian Basin. It serves as the general partner of the company.

Last Friday, after posing stellar results earlier in the week, the company priced a 6-million share secondary offering at $17.50, which was very well received, especially after its quarterly report. The total gross proceeds of the offering, before underwriters’ discounts and estimated offering expenses, will be approximately $106.5 million. Kimbell has granted the underwriters an option to purchase up to 900,000 additional common units at the public offering price less the underwriting discount and commissions.

Investors receive a 10.29% distribution. Citigroup has a Buy rating with a $24 target price. The consensus target is $23.67. Friday’s close was at $18.27, in a 52-week trading range of $12.68 to $20.08.

USA Compression Partners

This company posted huge third-quarter results last week. USA Compression Partners L.P. (NYSE: USAC) is a growth-oriented Delaware limited partnership that provides natural gas compression services in terms of total compression fleet horsepower.

The company offers compression services to oil companies and independent producers, processors, gatherers and transporters of natural gas and crude oil, as well as operates stations. It primarily focuses on providing natural gas compression services to infrastructure applications, including centralized natural gas gathering systems and processing facilities.

The company’s stellar report for the third quarter highlighted total revenues of $179.6 million, compared to $158.6 million for the year-ago period. Net income was $9.6 million, up from $4.1 million year over year. Net cash provided by operating activities was $49.2 million, compared to $45.3 million a year ago.

Investors take home an 11.67% distribution. Mizuho’s Neutral rating includes an $18 target price, while the consensus target is $17.50. The shares closed above both levels Friday at $18.27.

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These four top companies offer reasonably safe and reliable distributions and are solid players in the energy infrastructure and royalty arena. Investors looking for solid total return potential can do well owning these MLP leaders. Note though that MLP distributions may contain return of principal. Investors looking to avoid the pesky K-1s can always purchase shares in the ALPS Alerian MLP exchange-traded fund (NYSE: AMLP) and receive a form 1099 instead.

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