While many can argue about the use of oil and natural gas versus renewable sources, the reality is that the internal combustion engine and natural gas fired power plants are not going anywhere, any time soon. Both Brent and West Texas Intermediate crude have traded sideways to down for months and may be on the verge of a big summertime break-out to higher levels. While it is unlikely oil will hit the $120 a barrel mark as it did last summer, it is a good bet that both benchmarks will trade higher soon.
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Income investors looking to the energy sector, which was the only sector to outperform in 2022, are often drawn to the energy master limited partnerships (MLPs), and with good reason. While they do tend to trade higher when the crude benchmarks do, their services to transport and store oil and gas are contract-based regardless of commodity pricing.

Oil sold off recently on the bank liquidity and contagion issues, and with China demand poised to explode later in the year, investors who step in now could be in for some sizable total return potential with the top MLPs. We screened our 24/7 Wall St. MLP research universe and found seven Buy-rated stocks with huge distributions that look like great buys now.

It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

Antero Midstream

With shares trading at just over $10 apiece, this well-run company offers a huge total return package. Antero Midstream Corp. (NYSE: AM) 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 an 8.96% distribution. Wells Fargo has its target price for Antero Midstream stock set at $13. The consensus target is $10.50. The shares closed 3% lower on Wednesday at $9.99.

Energy Transfer

This top MLP is a very safe way for investors looking for energy exposure and income. Energy Transfer L.P. (NYSE: ET) owns and operates one of the largest and most diversified portfolios of energy assets in the United States, with a strategic footprint in all the major domestic production basins.
This publicly traded limited partnership has core operations that include complimentary natural gas midstream, intrastate and interstate transportation and storage assets; crude oil, natural gas liquids (NGLs) and refined product transportation and terminaling assets; NGL fractionation; and various acquisition and marketing assets.
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After the purchase of Enable Partners last December, Energy Transfer owns and operates more than 114,000 miles of pipelines and related assets in all the major U.S. producing regions and markets across 41 states, further solidifying its leadership position in the midstream sector.

Through its ownership of Energy Transfer Operating, formerly known as Energy Transfer Partners, the company also owns Lake Charles LNG, as well as the general partner interests, the incentive distribution rights and 28.5 million common units of Sunoco, as well as the general partner interests and 39.7 million common units of USA Compression Partners.

Investors receive a 10.37% distribution. Morgan Stanley’s price target is $19, and Energy Transfer stock has a $16.75 consensus target. The shares closed on Wednesday at $11.76.

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, 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 MLPs.

Enterprise Products Partners stock comes with a 7.87% distribution. The J.P. Morgan price target is $33, and the consensus target is $31.67. Shares closed on Wednesday at $24.94.

Hess Midstream

This is the limited partnership midstream arm of one of the country’s top energy companies. Hess Midstream L.P. (NYSE: HESM) owns, develops, operates and acquires midstream assets. The company operates through three segments.

The Gathering segment owns natural gas gathering and crude oil gathering systems, as well as produced water gathering and disposal facilities. Its gathering system consists of approximately 1,350 miles of high and low pressure natural gas and natural gas liquids gathering pipelines with capacity of approximately 450 million cubic feet per day, and the crude oil gathering system comprises approximately 550 miles of crude oil gathering pipelines.
Hess Midstream’s Processing and Storage segment comprises Tioga Gas Plant, a natural gas processing and fractionation plant located in Tioga, North Dakota; a 50% interest in the Little Missouri 4 gas processing plant located in south of the Missouri River in McKenzie County, North Dakota; and Mentor Storage Terminal, a propane storage cavern and rail, and truck loading and unloading facility located in Mentor, Minnesota.
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The Terminaling and Export segment owns Ramberg terminal facility; Tioga rail terminal; and crude oil rail cars, as well as Johnson’s Corner Header System, a crude oil pipeline header system.

The distribution yield here is 8.49%. The $34 Citigroup price target is the same as the consensus target. Hess Midstream stock closed at $26.90 on Wednesday.

Magellan Midstream Partners

This is another top midstream MLP company that checks in high on the distribution list. Magellan Midstream Partners L.P. (NYSE: MMP) engages in the transportation, storage and distribution of refined petroleum products and crude oil in the United States.

The company operates refined products pipelines that transport gasoline, diesel fuel, aviation fuel, kerosene and heating oil to refiners, wholesalers, retailers, traders, railroads, airlines and regional farm cooperatives, as well as to end markets, including retail gasoline stations, truck stops, farm cooperatives, railroad fueling depots, military bases and commercial airports.

The company also provides pipeline capacity and tank storage services, as well as terminaling, ethanol and biodiesel unloading and loading, additive injection, custom blending, laboratory testing and data services to shippers. In addition, Magellan Midstream Partners owns and operates crude oil pipelines and storage facilities as well as marine terminals located along coastal waterways that provide distribution, storage, blending, inventory management and additive injection services for refiners, marketers, traders and other end users of petroleum products.

Investors receive an 8.01% distribution. Magellan Midstream Partners stock has a $58 price objective at Raymond James. The consensus target is $57.86, and Wednesday’s closing print was $51.31.

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.
MPLX’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.
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MPLX stock investors receive a 9.19% distribution. J.P. Morgan’s $41 price target is higher than the $38.92 consensus target and Wednesday’s closing price of $33.79.

Sunoco

This well-known company could be the best buy for investors who are more conservative. 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.

Sunoco GP serves as the general partner of the company.

Investors receive a 7.97% distribution. Raymond James has a $52 target price. The consensus target is $49.57. Sunoco stock closed on Wednesday at $41.98 a share.

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These seven top companies offer reasonably safe and reliable distributions, plus are major players in the energy infrastructure arena. Investors looking for solid total return potential can do well owning any of these top MLP leaders. It is important to note that MLP distributions may contain return of principal. Those looking to avoid the pesky K-1s can always purchase shares in the ALPS Alerian MLP ETF, which holds many of these top stocks. Investors receive a form 1099 instead of a K-1.

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