Top-3 High-Yield MLPs for Investors Seeking Income Payouts
These three Master Limited Partnerships can offer high yields above 5% and also sustainable distributions for income investors.
You're reading 0 of 1 free page.
Register to read more or Unlock Pro — 50% Off Ends Soon
Investors looking for high yields should consider Master Limited Partnerships, or MLPs. Many MLPs 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 three top MLPs that have high yields above 5%, and also sustainable distributions.
1. Hess Midstream LP (HESM)
Hess Midstream LP HESM owns and operates midstream assets primarily located in the Bakken and Three Forks Shale plays in North Dakota. It provides oil, gas and water midstream services to Hess and third-party customers in the U.S.
Hess Midstream has long-term commercial contracts, which extend through 2033. Its contracts are 100% fee-based and hence they minimize the exposure of the company to commodity prices. In addition, contracts have strict minimum volume commitments and thus they secure the cash flows of Hess Midstream during adverse periods, such as recessions. About 85% of the revenues of Hess Midstream are protected by minimum-volume commitments.
In late January, Hess Midstream reported financial results for the fourth quarter of fiscal-year 2024. Throughput volumes grew 15% for gas processing and gas gathering over the prior year’s quarter thanks to higher production and higher gas capture. As a result, revenue grew 11% and earnings-per-share grew 24%, from $0.55 to $0.68.
Management provided strong guidance for 2025 thanks to strong business momentum in all segments. It expects 10% growth of throughput volumes, 11% growth of adjusted EBITDA and at least 5% annual growth of distributions until 2027. It also expects to reduce leverage ratio (net debt to EBITDA) below 2.5x by the end of 2026.
Hess Midstream has been consistently growing its earnings thanks to growing production of Hess and annual fee hikes linked to inflation. It has promising growth prospects ahead, primarily thanks to secular growth in gas capture. The company expects to grow its gas and oil volumes by 10% per year until 2026 and by more than 5% in 2027.
It also expects to grow its EBITDA and free cash flow by more than 10% per year until 2026. Given also that leverage is expected to fall by the end of 2026, management expects to raise the distribution by at least 5% per year through 2027.
2. Enterprise Products Partners LP (EPD)
Enterprise Products Partners EPD was founded in 1968. It is structured as an 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.
Enterprise Products Partners reported strong fourth-quarter 2024 earnings, delivering $1.6 billion in net income, or $0.74 per common unit, representing a 3% increase over the prior year. Adjusted cash flow from operations rose 4% to $2.3 billion, with the company declaring a quarterly distribution of $0.535 per unit, a 4% year-over-year increase. Enterprise also continued its capital return strategy, repurchasing 2.1 million common units during the quarter and 7.6 million units for the full year, bringing total buybacks under its program to $1.1 billion.
For the full year, the company posted $9.9 billion in EBITDA, moving 12.9 million barrels of oil equivalent per day and setting multiple financial and operational records. Key infrastructure expansions included the completion of two Permian processing plants, the acquisition of Pinon Midstream, and investments in its crude pipeline system.
These investments are expected to bring in future growth. In 2025, Enterprise expects to bring online additional gas processing capacity in the Permian, the Bahia NGL pipeline and expanded NGL and ethylene export capacity at its Gulf Coast terminals.
Separately, exports continue to be a growth catalyst for EPD. The company continues to pursue commercial opportunities for its SPOT offshore crude export terminal but has yet to secure sufficient customer commitments. EPD remains focused on growing its broader export footprint, targeting over 100 million barrels per month in hydrocarbon exports by 2027.
In the meantime, EPD stands as arguably the safest MLP. Enterprise ended 2024 with $32.2 billion in total debt, a leverage ratio of 3.1x, and $4.8 billion in available liquidity. 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. Enterprise Products’ high-quality assets generate strong cash flow, even in recessions.
As a result, Enterprise Products has been able to raise its distribution to unit holders for 27 years in a row.
3. Brookfield Infrastructure Partners LP (BIP)
Brookfield Infrastructure Partners L.P. BIP 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. Brookfield Infrastructure Partners is one of multiple publicly-traded listed companies under Brookfield Corporation (BN).
Brookfield Infrastructure Partners is a Bermuda-based limited partnership that is treated as a partnership for U.S. and Canadian tax purposes, and it reports financial results in U.S. dollars.
BIP reported resilient results for Q4 2024 on January 30. The diversified utility reported funds from operations (FFO) of $646 million, up 3.9% year over year. FFO per unit (FFOPU) was $0.82, up 3.8%. The full-year results provide a bigger picture. FFO climbed 7.9% year-over-year. FFOPU was $3.12, up 5.8%. Normalized for the impact of foreign exchange, the FFOPU growth would have been 10%, which better reflects the business’s operational strength.
For the year, it achieved its target of $2 billion capital recycling proceeds. It also deployed $1.1 billion across its backlog of organic growth projects and three tuck-in acquisitions, which should help contribute to growth. It also added about $1.8 billion of new projects to its capital backlog at attractive expected returns.
From 2015 to 2024, the FFOPS and DPS had compound annual growth rates of 6.2% and 7.8%, respectively, on a split-adjusted basis. BIP has a strong track record of selling mature assets and redeploying capital for attractive long-term returns.
Additionally, its infrastructure portfolio also expects to experience strong organic growth of 6% to 9% per year. BIP intends to make new investments of $1.5 billion each year. BIP targets an FFOPS growth rate of 10% and dividend growth of 5& to 9%.
Importantly, BIP continues to reward its unit holders with an increasing cash distribution. It just raised its quarterly distribution by 6% to $0.43 per unit, equating an annualized payout of $1.72. BIP has now increased its dividend for 16 years in a row.
At the time of publication, Ciura had no positions in any securities mentioned.