3 High Yield MLPs With Safe Distributions

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Investors looking for high yields should consider Master Limited Partnerships, or MLPs. Many Master Limited Partnerships yield 5% or more, even double-digit yields in some cases.Of course, investors should not simply chase the highest yields—some high-yielding stocks have poor fundamentals and end up cutting their payouts to investors.This article will discuss 3 top MLPs that have high yields and also sustainable distributions.

Enterprise Products Partners (EPD)
Enterprise Products Partners was founded in 1968. It is structured as a Master Limited Partnership, or MLP, and operates as an oil and gas storage and transportation company. Enterprise Products has a tremendous asset base which consists of nearly 50,000 miles of natural gas, natural gas liquids, crude oil, and refined products pipelines. It also has storage capacity of more than 250 million barrels. These assets collect fees based on materials transported and stored.On October 31, 2023, EPD announced its Q3 earnings, reporting a net income attributable to common unitholders of $1.3 billion, a decrease from $1.4 billion in Q3 2022. However, Distributable Cash Flow (DCF) remained consistent at $1.9 billion, and distributions declared for the quarter increased by 5.3% to $0.50 per common unit. The company also retained a significant portion of DCF, totaling $773 million for reinvestment in the partnership’s growth.Enterprise Products Partners is one of the safest midstream MLPs. It has credit ratings of BBB+ from Standard & Poor’s and Baa1 from Moody’s, which are higher ratings than most MLPs. It also has a distribution coverage ratio of nearly 2x, leaving room for distribution increases and unit repurchases.As a result, Enterprise Products has been able to raise its distribution to unitholders for 25 years in a row. EPD yields 7.5%.

MPLX, LP was formed by Marathon Petroleum (MPC) in 2012. The business operates in two segments: Logistics and Storage – which relates to crude oil and refined petroleum products – and Gathering and Processing – which relates to natural gas and natural gas liquids (NGLs). MPLX generated $5.0 billion in distributable cash flow in 2022.In late October, MPLX reported (10/31/23) financial results for the third quarter of fiscal 2023. Adjusted EBITDA and distributable cash flow (DCF) per share grew 9% over the prior year’s quarter, primarily thanks to higher tariff rates and increased gas volumes.MPLX has a safe distribution, even during economic downturns. MPLX maintained a healthy consolidated debt to adjusted EBITDA ratio of 3.4x and a solid distribution coverage ratio of 1.6. MPLX has increased its dividend for 10 years in a row. MPLX currently yields 9.4%.

Brookfield Infrastructure Partners (BIP)
Brookfield Infrastructure Partners L.P. is one of the largest global owners and operators of infrastructure networks, which includes operations in sectors such as energy, water, freight, passengers, and data.BIP reported solid Q3 2023 results on 11/1/23. Funds from operations (FFO) rose 6.7% year over year (YOY) to $560 million, supported by strong base business performance and the contribution of ~$1 billion of capital deployed in new acquisitions over the past year, partially offset by the impact of nearly $2 billion in asset sales. Organic growth was near the high-end of its 6-9% target range, benefiting from elevated levels of inflation across its transport and utilities segments.FFO per unit climbed 7.4% to $0.73. During Q3, BIP closed the Triton transaction, which brought it a global intermodal logistics business that has a leading market position and generates strong cash flow, which allows for investment in fleet replacements and growth during favorable markets or the harvest of cash in less attractive markets.BIP maintains a solid credit rating of BBB+. It primarily finances at the asset level. So, in a worst-case scenario, it’d end up handing over a struggling asset to a creditor; the rest of the business wouldn’t be impacted. In any case, BIP is set up to grow. It sees its capital recycling program providing a record of ~$2 billion of proceeds, in any given year, which could be reinvested for its target returns of 12-15% on its investments.BIP has increased its distribution for 14 consecutive years. BIP currently yields 5%.More By This Author:3 High Yield REITs To Buy
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