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- Weaker demand in the United States and China and rising supply have hit oil pricing.
- Hedge funds and portfolio managers have their lowest bullish bets on oil since 2011.
- Sit back and let dividends do the heavy lifting for a simple, steady path to serious wealth creation over time. Grab a free copy of “7 Things I Demand in a Dividend Stock,” plus get our two best dividend stocks to own today. Access 2 legendary, high-yield dividend stocks Wall Street loves.
Over the years, the energy trade has often been considered an old-school relic. Still, as we found out last winter, the much-hyped electric vehicle revolution has not arrived and likely will never dominate the industry. Current spot pricing for black gold has fallen back to the lowest level in almost a year, and it was reported that hedge funds, while still long the benchmarks, are shorting gasoline and distillate futures. This while OPEC has decided to keep its production cuts in place until the end of the year.
This shake-out of oil pricing has occurred despite war breaking out in the Middle East after the devastating Hamas attack on Israel last October. Now that the war has expanded, there are worries that Iran could become more involved as Israel turns its attention to eliminating Hezbollah and finishing off Hamas. If oil supplies are threatened in the region, prices could explode.
One of the best ideas for investors looking to add energy to their portfolios at current pricing is master limited partnerships (MLPs). They pay big and dependable dividends, and many energy master limited partnerships are midstream companies that control the movement or storage of oil and natural gas via contract pricing with the big oil producers.
We screened our 24/7 Wall Street MLP research database, looking for top companies that pay ultra-high-yield distributions to their shareholders. Six top companies hit our screen, including a 2023 initial public offering, and all are set to pay shareholders incredible and dependable distributions.
Enterprise Products Partners
This company is one of the largest publicly traded energy partnerships and pays a 7.28% dividend. Enterprise Products Partners L.P. (NYSE: EPD) provides various midstream energy services, including:
- Gathering
- Processing
- Transporting and storing natural gas, natural gas liquids (NGL) fractionation
- Import and export terminalling
- Offshore production platform services
The company has four reportable business segments:
- Natural Gas Pipelines and Services
- NGL Pipelines and Services
- Petrochemical Services
- Crude Oil Pipelines and Services
One reason many analysts may like the stock is its distribution coverage ratio. The company’s coverage ratio is well above 1x, making it relatively less risky in the MLP sector.
Energy Transfer
This top master limited partnership is a safe way for investors looking for energy exposure and income, as the company pays a massive 8.10% distribution. 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 of the major domestic production basins.
The company is a publicly traded limited partnership with core operations that include:
- Complementary natural gas midstream, intrastate, and interstate transportation and storage assets
- Crude oil, natural gas liquids (NGL), and refined product transportation and terminalling assets
- NGL fractionation
- Various acquisition and marketing assets
After purchasing Enable Partners in December 2021, Energy Transfer owns and operates more than 114,000 miles of pipelines and related assets in 41 states, covering all of the major U.S. producing regions and markets. This further solidifies 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, the general partner interests, the incentive distribution rights, and 28.5 million standard units of Sunoco L.P. (NYSE: SUN), and the public partner interests and 39.7 million standard units of USA Compression Partners L.P. (NYSE: USAC).
Hess Midstream
This is the limited partnership midstream arm of one of the country’s top energy companies, which is being purchased by Chevron Corp. (NYSE: CVX) and pays a stellar 7.54% dividend. Hess Midstream L.P. (NYSE: HESM) owns, develops, operates, and acquires midstream assets.
The company operates through three segments:
- Gathering
- Processing and Storage
- Terminating and Exporting
The gathering segment owns natural gas gathering and crude oil gathering systems and produces 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 a capacity of about 450 million cubic feet per day
- The crude oil gathering system comprises approximately 550 miles of crude oil gathering pipelines
The Processing and Storage segment comprises:
- Tioga Gas Plant, a natural gas processing and fractionation plant located in Tioga, North Dakota
- 50% interest in the Little Missouri 4 gas processing plant located south of the Missouri River in McKenzie County, North Dakota
- Mentor Storage Terminal, a propane storage cavern, and rail and truck loading and unloading facility located in Mentor, Minnesota
The Terminaling and Export segment owns the Ramberg terminal facility, Tioga rail terminal, crude oil rail cars, Johnson’s Corner Header System, and a simple oil pipeline header system.
Mach Natural Resources
This 2023 IPO is trading below the initial price. Mach Natural Resources L.P. (NYSE: MNR) recently conducted a secondary offering to purchase even more producing assets and will pay an estimated gigantic 13% dividend.
Mach Natural Resources is an independent upstream oil and gas company focused on acquiring, developing, and producing oil, natural gas, and natural gas liquids reserves in the Anadarko Basin region of Western Oklahoma, southern Kansas, and the Texas panhandle.
The analysts at Raymond James noted that Mach is led by Tom Ward, co-founder of Chesapeake Energy. Mach is another entrant into the E&P MLP space. It is a pure-play operator in the Anadarko Basin, leveraging its strong position (1 million net acres) to become the primary consolidator in the region.
Mach’s midstream position and lower base decline (~20%) allow the company to target a lower reinvestment rate (~30%) relative to the overall industry. In addition, it is one of the only exploration and production companies organized as a limited partnership as it is an oil and gas producer.
MPLX
This company is one of the top holdings in the Alerian MLP energy exchange-traded fund and pays a healthy 8% dividend. MPLX L.P. (NYSE: MPLX) is primarily engaged in transporting crude oil and refined products and terminating in the US Midwest and Gulf Coast regions and natural gas gathering and processing in the northeast from its prior acquisition of MarkWest Energy in 2015. Independent U.S. refiner Marathon Petroleum Corp. (NYSE: MPC) formed MPLX.
The company’s assets include:
- Network of crude oil and refined product pipelines
- Inland marine business
- Light-product terminals
- Storage caverns
- Refinery tanks
- Docks
- Loading racks and associated piping
- Crude and light-product marine terminals
MPLX also owns:
- Crude oil and natural gas gathering systems
- Pipelines, natural gas, and NGL processing and fractionation facilities in key U.S. supply basins
USA Compression Partners
While perhaps less known than their peers, this top company pays shareholders a hefty 9.67% dividend. USA Compression Partners L.P. (NYSE: USAC) provides natural gas compression services.
The company offers compression services to:
- Oil companies and independent producers
- Processors
- Gatherers
- Transporters of natural gas and crude oil, as well as operating stations
USA Compression Partners primarily provides natural gas compression services to infrastructure applications, including centralized natural gas gathering systems, processing facilities, and gas lift applications for crude oil wells.
Grab These Energy Bargains Now
Six top companies offering safe and reliable distributions are significant players in the energy infrastructure arena. Those looking for solid total return potential can do well owning these MLP leaders. It is important to note that MLP distributions may contain a return of principal.
Those looking to avoid the pesky K-1s can always purchase shares in the ALPS Alerian MLP exchange-traded fund (NYSE: AMLP), which pays a hefty 7.70% dividend. Investors receive a 1099 instead of a K-1.
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