3 Midstream MLPs With 5%+ Yields And Growth Potential

May 17, 2019 9:04 AM ETEPD, ET, ENB, ENB:CA27 Comments
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Sure Dividend


  • Many midstream pipeline companies are undervalued right now due to poor sector sentiment, improved company fundamentals, and strong industry growth tailwinds.
  • Top-quality MLPs have high yields, but also sustainable payouts and manageable debt levels.
  • Investors should remain focused on quality companies with attractive valuations and the ability to grow distributions over the long-term.

By Samuel Smith

We believe that midstream pipeline (many of which are master limited partnerships, or "MLPs") companies are significantly undervalued right now due to an attractive combination of poor sector sentiment, improved company fundamentals, and strong industry growth tailwinds.

In addition, many MLPs have strong distributions with yields significantly above 5%. You can see our full list of 5%+ yielding dividend stocks here.

Within the sector, there are three high-yield investments in particular that look especially attractive to us today: Enbridge (ENB), Enterprise Products Partners (EPD), and Energy Transfer (ET). This article will discuss why now is a good time to consider midstream MLPs, and why these three in particular are attractive for income investors.

Why Midstream MLPs Are Attractive Now

MLPs are now in the midst of a strong secular growth cycle and yet trade at extremely cheap valuations. The growth runway appears to have considerable room to run as well, since the world is going to need more oil and natural gas. The International Energy Agency's World Energy Outlook 2018 posits that energy demand growth will be driven by developing economies, based on announced energy policy plans and targets.

Global energy demand is expected to grow by at least 25% through 2040, thanks in large part to the strong economic momentum in Asian economies like India and continued strong global population growth. While renewable energy and energy efficiency certainly pose a long-term threat, these estimates have already been accounted in the sector's impact quite conservatively, by cutting the projected demand in half.



Another major tailwind for North American pipeline MLPs is that the US and Canada are expected to play a major role in meeting that demand as growing players in the world market of energy production and exportation. In fact, in 2018 the US became the world's

This article was written by

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Sure Dividend helps individual investors find high quality dividend growth stocks with strong competitive advantages suitable for long-term holding. The authors who write for Sure Dividend on Seeking Alpha are as follows:Bob CiuraBen ReynoldsJosh Arnold

Disclosure: I am/we are long ET. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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