The Smartest High-Dividend Energy Stocks to Buy With $1,000 Right Now

Globe and Mail

21-05-2025

For investors trying to find high-yield stocks that can help supplement their income, the midstream energy space is one of the best sectors to look at. Meanwhile, $1,000 is a good starting point for investors to begin accumulating positions.
The following stocks all have solid opportunities in front of them, but it's worth noting that they all carry similar risks. Pipeline companies are generally considered energy toll roads with minimal exposure to energy prices. However, lower energy prices can eventually cause lower volumes through their systems, and customer stress can lead to contracts being renegotiated in severe situations. The midstream business is also capital intensive, so these companies do carry debt. As such, the stocks are not risk-free investments.
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With that said, let's look at three great stocks you can begin accumulating right now.
Energy Transfer
Energy Transfer (NYSE: ET) has one of the highest yields and one of the cheapest valuations in the midstream space. The stock carries a 7.3% yield, while it's valued at a forward enterprise value (EV) -to- EBITDA multiple of just 8.1 times. Before the pandemic, midstream master limited partnerships (MLPs) traded at an average 13.7x EV/EBITDA multiple between 2011 and 2016. While growth may have slowed slightly in the sector, it has begun to pick back up, and the sector as a whole is in some of the best financial shape it has ever been in.
For its part, Energy Transfer got a bit over its skis with debt during the pandemic's height and had to cut its distribution in half. However, it worked quickly to improve its leverage, and its distribution is now higher than before it reduced it in 2020. Last quarter, Energy Transfer declared that its balance sheet was in the strongest position in its history and that it had its highest ever percentage of take-or-pay contracts. For these contracts, it gets paid whether or not a customer uses its pipelines or services.
The company is also seeing a lot of growth opportunities stemming from increased natural gas demand. As such, it has ramped up its growth capital expenditure (capex) spending from $3 billion last year to $5 billion this year. Most of its growth projects will come online late this year or next, giving it a strong runway of growth for the next couple of years.
Enterprise Products Partners
A model of consistency, Enterprise Products Partners (NYSE: EPD) has been able to increase its distribution for 26 straight years through a number of economic and energy downturns. The company has a largely fee-based business, and it also likes to attach take-or-pay provisions to its contracts.
Enterprise has one of the best balance sheets in the midstream space, and it has also been increasing its growth capex spending. After dropping it to $1.6 billion in 2022, it plans to spend between $4 billion and $4.5 billion in growth projects this year, up from $3.9 billion a year ago. It currently has $6 billion in projects that are expected to come online this year, which should help provide it with some solid growth moving forward.
At a forward EV-to-EBITDA multiple of 10 times, Enterprise's stock trades at a higher valuation than Energy Transfer, but it is still well below past historical levels. The stock has also generally garnered a premium due to its consistency.
With a 6.6% yield and a consistently growing distribution, Enterprise is a stock that long-term investors can sleep well at night owning.
MPLX
MPLX (NYSE: MPLX) is another midstream stock with a high yield and strong balance sheet. It ended last quarter with only 3.3 times leverage (face value of total debt divided by trailing 12-month adjusted EBITDA) and a distribution coverage ratio of 1.5 times. It's also grown its distribution by 10% or more each of the past three years, including by 12.5% in 2024.
The company operates in two segments -- natural gas and NGL services, and crude oil and products logistics. On the crude side, it supports its parent refiner, Marathon Petroleum, so this part of its operations is very well protected from market swings. Meanwhile, most of its growth opportunities are coming from the natural gas and NGL (natural gas liquids) side of its business. It's taken its growth capex budget up to $1.7 billion this year, up from $889 million in 2024, with 85% of its spending going toward its natural gas and NGL services segments.
MPLX has also been expanding through bolt-on acquisitions. It is currently in the process of buying the remaining 55% interest in the BANGL pipeline system that it does not currently own. The BANGL system transports NGLs from the Permian basin to fractionation markets along the Gulf Coast, and is expected to enhance MPLX's strategic position within the Permian.
The stock currently has a 7.4% yield, and the company indicated that it will be able to continue its current double-digit pace of distribution increases into the future. With a forward EV-to-EBITDA multiple of 10.3 times, the stock is reasonably valued.
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