Top 3 High-Profit Pipeline Stocks You Should Invest In Immediately
# High-Dividend Pipeline Stocks Worth Investing In Today
Hey there, folks! If you're eyeing stocks with high dividend yields and a solid foundation, check out the midstream energy sector. The energy industry has seen some major transformations since the last big energy slump, and these days, producers are all about cash flow rather than rampant production growth.
Pipeline companies, in particular, have tightened their belts and improved their financial health. Volatility in energy prices still poses a risk, but with pipeline companies and their customers sitting pretty financially, it's an ideal time to jump into this sector.
So, let's snag three high-yield pipeline stocks that are worth adding to your portfolio right now. I'm a fan of them, and I've been holding onto each one for quite some time.
1. Energy Transfer
With a 7.3% forward dividend yield and plans to boost its distribution by 3-5% annually, Energy Transfer (ET 0.11%) deserves a spot on every income-oriented investor's watchlist. The company had to slash its dividend in half during the pandemic's height, but it's been working overtime to slash its debt, improve its balance sheet, and restore its dividend to pre-cut levels.
Last quarter, Energy Transfer touted its balance sheet as the sturdiest in its history. It also pointed out that it had a record high percentage of take-or-pay contracts, ensuring that it gets paid regardless of whether customers use its services. The company anticipates 90% of its EBITDA this year to come from fee-based services, which means it's sheltered from commodity price fluctuations.
While it's pouring $5 billion into growth projects this year, Energy Transfer is pretty excited about increasing natural gas demand. It's already scored a deal to supply natural gas to a planned data center in Texas and is on the lookout for AI-related opportunities. At a forward EV-to-EBITDA multiple of just 8.1 times, the stock is a steal, both comparatively and historically.
2. Enterprise Products Partners
Enterprise Products Partners (EPD -0.06%) is the midstream stock that'll let you sleep soundly at night. The company has upped its dividend every year for the past 26 years, even in the face of energy market turbulence. Currently, the stock boasts a 6.8% forward dividend yield after boosting its distribution by nearly 4% year over year last quarter.
Enterprise Products Partners takes a prudent approach and sports one of the best balance sheets in the midstream sector. It's a stickler for fee-based contracts with take-or-pay provisions when it can get them. Its distributable cash flow coverage ratio stood at 1.7 times last quarter.
Like Energy Transfer, Enterprise Products Partners is ramping up its growth spending this year to take advantage of attractive opportunities. It expects to invest between $4 billion and $4.5 billion this year, up from $3.9 billion last year. It currently has $6 billion in growth projects set to go live this year, setting the stage for steady growth in the coming years.
Trading at a forward EV/EBITDA ratio of under 10 times, the stock is a bargain.
3. Western Midstream Partners
Western Midstream Partners (WES 0.44%) is an income-lover's dream. The stock throws off a tasty 9.4% dividend yield and aims to grow its distribution at a mid-to-low single-digit pace annually. It wrapped up last year with debt levels below 3 times, which is exceptionally low for a midstream company.
Western Midstream's contracts often carry cost-of-service protections or minimum volume commitments (MVCs). MVCs obligate customers to ship a minimum volume of product (such as natural gas, NGLs, or crude) through its pipelines or pay as if they did. Like take-or-pay contracts, they safeguard against volume drops and help ensure future cash flows.
Western Midstream is focusing on safe, high-return organic growth projects that are supported by MVCs. It's in constant contact with its customers and can tweak its capex as needed to suit their needs. If it can't find enticing growth projects, it might consider acquisitions or buybacks.
The stock is a steal, trading at a forward EV/EBITDA ratio of 9 times analyst estimates for 2025.
- The midstream energy sector, with companies like Energy Transfer (ET 0.11%), is an ideal investment opportunity for income-oriented investors due to its high dividend yields and strong financial health.
- Enterprise Products Partners (EPD -0.06%) is a reliable midstream stock that offers a 6.8% forward dividend yield, a prudent approach to business, and a 26-year track record of annual dividend increases, making it an attractive addition to any portfolio.
- Western Midstream Partners (WES 0.44%) is a company worth considering for income-focused investors. It offers a 9.4% dividend yield and prioritizes safe, high-return organic growth projects, making it a potential bargain with a forward EV/EBITDA ratio of 9 times analyst estimates for 2025.
