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In this article, we discuss 10 best MLP dividend stocks to buy. You can skip our detailed analysis of MLPs and their performance over the years, and go directly to read 5 Best MLP Dividend Stocks to Buy.
A master limited partnership (MLP) is a publicly traded limited partnership that mainly engages in energy infrastructure and the real estate sector. Their tax structure and regular cash distribution enable these businesses to raise capital from investors in the market. With the steady growth in energy demand today, MLPs are integral to financing the infrastructure needed to enhance US domestic energy resources.
MLPs are increasingly becoming famous among investors as these securities can diversify their portfolios. These stocks are also popular because of their stable dividend payments. According to a report published by a Texas-based finance company Alerian, which provides transparent master limited partnerships and energy infrastructure benchmarks and analytics, there were no dividend cuts across the firm’s midstream indexes in the first quarter of 2022. This was the third consecutive quarter without any dividend cuts and 12 companies in the index raised their dividends during the quarter. In addition to this, these securities offer high yields, which is mainly rewarding in times of financial instability. Edward Jones, referring to a data by FactSet, mentioned in its report that the Alerian MLP Index has an average yield of 8.1%, compared with a 3.5% yield of the S&P 500 utility index and a 1.9% yield of the broader index, as of October 1.
As the market plummeted this year, MLP stocks are generating positive returns for shareholders. The S&P MLP Index returned 20.35% in 2022, versus a 24.8% decline in the S&P 500, as of the close of October 16. Similarly, the Alerian MLP Index, which tracks the performance of energy infrastructure MLPs, is up 13.77% year-to-date. As energy stocks like Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX), and Shell plc (NYSE:SHEL) are gaining investors’ attention, MLPs are also in focus due to the cash advantages they offer.
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Our Methodology:
The companies mentioned below are MLPs and pay dividends to shareholders. We selected these stocks considering their financial health, dividend policies, and overall fundamentals. The stocks are ranked according to their dividend yield, as of October 17.
Best MLP Dividend Stocks to Buy
10. Holly Energy Partners, L.P. (NYSE:HEP)
Dividend Yield as of October 17: 7.53%
Holly Energy Partners, L.P. (NYSE:HEP) is a Texas-based MLP that specializes in pipeline transportation. The company is also an independent petroleum refiner in the US. In Q2 2022, the company reported $78.5 million in distributable cash flow, up 17.7% from the same period last year. Its revenue for the quarter came in at $135.7 million, which saw a 7.5% growth from the prior-year period.
On July 21, Holly Energy Partners, L.P. (NYSE:HEP) declared a quarterly dividend of $0.35 per share, in line with its previous dividend. As of October 17, the stock has a dividend yield of 7.53%.
At the end of Q3 2022, 3 hedge funds in Insider Monkey's database owned stakes in Holly Energy Partners, L.P. (NYSE:HEP), the same as in the previous quarter. The collective value of these stakes is over $2.5 million. Among these hedge funds, Citadel Investment Group was the company's leading stakeholder in Q2.
In addition to some of the best dividend stocks like Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX), and Shell plc (NYSE:SHEL), investors are also paying attention to Holly Energy Partners, L.P. (NYSE:HEP).
9. Enterprise Products Partners L.P. (NYSE:EPD)
Dividend Yield as of October 17: 7.60%
Enterprise Products Partners L.P. (NYSE:EPD) is one of the largest MPLs, with headquarters in Texas. On October 5, the company declared a quarterly dividend of $0.475 per share, in line with its previous dividend. The company is one of the best dividend stocks on our list because it has raised its dividends 22 years in a row. As of October 17, the stock’s dividend yield came in at 7.60%.
In Q2 2022, Enterprise Products Partners L.P. (NYSE:EPD) reported strong cash generation, with its distributable cash flow coming in at $2 billion, compared with $1.6 billion during the same period last year. The company’s operating cash flow for the quarter also jumped to $2.1 billion, from $1.7 billion in the prior-year quarter. The financial position of the company is stable enough to support its shareholder return.
In June, Truist raised its price target on Enterprise Products Partners L.P. (NYSE:EPD) to $30 with a Buy rating on the shares, highlighting the company’s continuous revenue growth over the years.
As of the close of Q2 2022, 23 hedge funds tracked by Insider Monkey owned investments in Enterprise Products Partners L.P. (NYSE:EPD), compared with 19 a quarter earlier. These stakes have a combined value of $184.4 million.
Fairholme Capital Management mentioned Enterprise Products Partners L.P. (NYSE:EPD) in its Q2 2022 investor letter. Here is what the firm has to say:
“Enterprise Products Partners L.P. (NYSE:EPD) is the largest position in the Fund. Enterprise provides processing and transportation services to producers and consumers of natural gas, natural gas liquids, and oil. These hydrocarbons are critical for modern life and have few if any, ready substitutes. Commodity prices do not greatly affect the company’s toll road fees. Enterprise is priced at less than nine times distributable cash flows and pays a 7.5% cash distribution.”
8. Western Midstream Partners, LP (NYSE:WES)
Dividend Yield as of October 17: 7.67%
Western Midstream Partners, LP (NYSE:WES) is a Texas-based MLP that delivers essential energy and is also involved in the transportation of natural gas and crude oil. In Q2 2022, the company reported an operating cash flow of over $467 million, compared with $276.4 million in the previous quarter. Its free cash flow also jumped to $372 million during the quarter, from $200.3 million in the preceding quarter. The company's revenue of $876 million showed a 22% growth from the same period last year.
Western Midstream Partners, LP (NYSE:WES) currently pays a quarterly dividend of $0.50 per share, with a dividend yield of 7.67%, as of October 17. The company has raised its dividend five times since 2021, coming through as one of the best dividend stocks on our list.
In August, Wolfe Research initiated its coverage of Western Midstream Partners, LP (NYSE:WES) with a Peer Perform rating, appreciating its balance sheet and high Permian leverage.
The number of hedge funds tracked by Insider Monkey owning stakes in Western Midstream Partners, LP (NYSE:WES) stood at 8 in Q2 2022, growing from 6 in the previous quarter. These stakes have a total value of nearly $57 million. With 1.2 million shares, Arrowstreet Capital was the company's leading stakeholder in Q2.
7. Energy Transfer LP (NYSE:ET)
Dividend Yield as of October 17: 8.02%
Energy Transfer LP (NYSE:ET) is an American publicly-traded MLP that is engaged in natural gas and propane pipeline transport. The company is one of the best dividend stocks as it has raised its dividends for three consecutive quarters this year. It currently pays a quarterly dividend of $0.23 per share for a dividend yield of 8.02%, as of October 17.
In Q2 2022, Energy Transfer LP (NYSE:ET) reported revenue of $26 billion, up 71.5% from the same period last year. The company's distributable cash flow (DCF) attributable to partners came in at $1.88 billion, compared with $1.4 billion in the prior-year quarter. This DCF was enough to cover its dividend payments. Its operating cash flow stood at $2.3 billion for the quarter.
In August, Barclays raised its price target on Energy Transfer LP (NYSE:ET) to $14 with an Overweight rating on the shares, appreciating the company's fundamentals in this challenging environment.
At the end of Q2 2022, 36 hedge funds in Insider Monkey's database owned stakes in Energy Transfer LP (NYSE:ET), up from 31 in the previous quarter. The collective value of these stakes is nearly $599 million. Abrams Capital Management owned the largest position in the company in Q2.
6. Sunoco LP (NYSE:SUN)
Dividend Yield as of October 17: 8.33%
Sunoco LP (NYSE:SUN) is an American MLP that is engaged in the distribution of motor fuels. The company distributes fuels to over 7,300 gas stations that are owned by third parties. In June, Mizuho upgraded the stock to Buy with a $44 price target. The firm mentioned that the company's flexible business model should prove resilient in the current environment and its balance sheet is also well-positioned to acquire third-party assets.
Sunoco LP (NYSE:SUN) currently pays a quarterly dividend of $0.8225 per share. As of October 17, the stock's dividend yield came in at 8.33%.
At the end of Q2 2022, 2 hedge funds tracked by Insider Monkey owned stakes in Sunoco LP (NYSE:SUN), the same as in the previous quarter. These stakes have a total value of $285,000. PEAK6 Capital Management was the company's leading stakeholder.
In addition to popular stocks like Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX), and Shell plc (NYSE:SHEL), Sunoco LP (NYSE:SUN) can be a valuable addition to dividend portfolios.
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Disclosure. None. 10 Best MLP Dividend Stocks to Buy is originally published on Insider Monkey.
