Latest news with #pipelinecompanies
Yahoo
31-05-2025
- Business
- Yahoo
Here Are My Top 3 High-Yield Pipeline Stocks to Buy Now
Energy Transfer stock has a high yield with plans to increase its distribution moving forward. Enterprise Product Partners is a sleep-well-at-night stock with an attractive yield. Western Midstream Partners is an income-oriented investor's dream. 10 stocks we like better than Energy Transfer › If you're looking for stocks with high dividend yields that are safe, the midstream energy sector is a great place to start your search. The energy industry has transformed itself since the last big energy bust. Producers are no longer chasing production growth and instead are more focused on their cash flows. Pipeline companies, meanwhile, have improved their balance sheets and learned to grow within their cash flow. Energy prices and their impact on volumes are always a risk, but with both pipeline companies and their customers in solid financial shape, now is a great time to invest in the sector. Let's look at three high-yield pipeline stocks to invest in right now. I currently own all three and have for a long time. With a 7.3% forward yield and plans to increase its distribution by between 3% to 5% a year moving forward, Energy Transfer (NYSE: ET) is a stock that should be on every income-oriented investor's radar. After being forced to cut its distribution in half during the height of the pandemic when the economy effectively shut down for a short time, the company has worked hard to lower its leverage, improve its balance sheet, and restore its distribution to a level that is now above where it was before the cut. Last quarter, Energy Transfer proclaimed that its balance sheet was in the strongest position in its history. It also noted that it had its highest-ever percentage of take-or-pay contracts, which means that it gets paid on these agreements regardless of whether or not customers use its services. Overall, it expects 90% of its earnings before interest, taxes, depreciation, and amortization (EBITDA) this year to come from fee-based services, where it has no exposure to fluctuating commodity costs or spreads. These types of contracts add to the safety of its cash flows and, thus, distributions. Meanwhile, the company sees a lot of attractive growth opportunities ahead stemming from increased natural gas demand. It is ramping up its growth capital expenditure (capex) this year to $5 billion from $3 billion, with an expectation of mid-teens returns on its projects. Energy Transfer has already signed a deal to supply natural gas to a planned data center in Texas and continues to explore artificial intelligence (AI) related opportunities. Trading at a forward enterprise value (EV)-to-EBITDA multiple of just 8.1 times, the stock is also cheap both on a relative basis and on a historical basis. If there is one midstream stock you can sleep well owning, it's Enterprise Product Partners (NYSE: EPD). The company has increased its distribution every year for the past 26 years through various energy and stock market turmoil. At present, the stock sports a 6.8% forward yield after increasing its distribution by nearly 4% year over year last quarter. The company takes a conservative approach and has one of the best balance sheets in the midstream sector. Like Energy Transfer, it also has a largely fee-based business and includes take-or-pay provisions in its contracts when it can. It also carries a robust coverage ratio based on its distributable cash flow (operating cash flow minus maintenance capex), which stood at 1.7 times last quarter. Like Energy Transfer, it has increased its growth capex spending this year to take advantage of attractive opportunities. After reducing its growth project spending to only $1.6 billion in 2022, it plans to spend between $4 billion and $4.5 billion this year, up from $3.9 billion a year ago. It currently has $6 billion in growth projects set to come online this year, paving the way for solid growth over the next couple of years. Trading at a forward EV/EBITDA ratio of under 10 times, the stock is attractively valued. Western Midstream Partners (NYSE: WES) is an income-oriented investor's dream. The stock has a robust 9.4% yield and plans to grow its distribution by mid-to-low single digits annually. It ended last year with leverage of under 3 times, which is very low for a midstream company, so it's in strong financial shape. The company's contracts generally have cost-of-service protections and/or minimum volume commitments (MVCs). MVCs require a customer to ship a minimum volume of product -- such as natural gas, natural gas liquids (NGLs), or crude -- through its pipelines or pay as if they did. Like take-or-pay contracts, they help ensure future cash flows and mitigate risk against volume declines. It's not pursuing as much growth as either Energy Transfer or Enterprise, but it is looking for safe, high-return organic growth projects that are supported by MVCs. It said it is in close contact with its customers and can quickly reduce or increase its capex based on their needs. In the event it can't find attractive growth projects, it said it could consider acquisitions or stock buybacks. The stock is a good value, trading at a forward EV/EBITDA ratio of 9 times 2025 analyst estimates. Before you buy stock in Energy Transfer, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Energy Transfer wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $638,985!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $853,108!* Now, it's worth noting Stock Advisor's total average return is 978% — a market-crushing outperformance compared to 171% for the S&P 500. Don't miss out on the latest top 10 list, available when you join . See the 10 stocks » *Stock Advisor returns as of May 19, 2025 Geoffrey Seiler has positions in Energy Transfer, Enterprise Products Partners, and Western Midstream Partners. The Motley Fool recommends Enterprise Products Partners. The Motley Fool has a disclosure policy. Here Are My Top 3 High-Yield Pipeline Stocks to Buy Now was originally published by The Motley Fool Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Globe and Mail
21-05-2025
- Business
- Globe and Mail
The Smartest High-Dividend Energy Stocks to Buy With $1,000 Right Now
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. Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More » 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. Should you invest $1,000 in Energy Transfer right now? Before you buy stock in Energy Transfer, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Energy Transfer wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $642,582!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $829,879!* Now, it's worth noting Stock Advisor 's total average return is975% — a market-crushing outperformance compared to172%for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of May 19, 2025
