Oil has been somewhat range bound as we head into spring this week, but the good thing for most oil producers is that over the $50 a barrel level most are able to wring out a profit. The good news for investors is that the top energy master limited partnerships (MLPs) offer a safer way to play the sector, and they also pay out some sizable distributions.
A new research note from Stifel points out that fourth-quarter results for the companies in its MLP research universe exceeded expectations, and with oil finally edging back toward the $60 level, the firm feels that while it should be supportive of the upstream producer and volumes, investors continue to push the industry toward free cash flow.
The firm remains bullish on four large-cap MLPs, two of which are on the Stifel Select List. All make sense for growth and income accounts looking for dependable distributions.
Enterprise Products Partners
This is one of the largest publicly traded partnerships and a leading North American provider of midstream energy services to producers and consumers. Enterprise Products Partners L.P. (NYSE: EPD) is the largest publicly traded master limited partnership providing a wide variety of midstream energy services, including gathering, processing, transportation and storage of natural gas, natural gas liquids fractionation, import and export terminaling, and offshore production platform services.
One reason many analysts may have a liking for the stock might be its distribution coverage ratio. The company’s distribution coverage ratio is well above one times, making it relatively less risky among the MLPs. The company’s distributions have grown consistently over the years, and earlier this year, Enterprise Products Partners announced that the board of directors of its general partner declared an increase in the quarterly cash distribution paid to partners to $0.435 per common unit, or $1.74 per unit on an annualized basis.
Investors are paid a very solid 6.19% distribution. The Stifel price target for the stock is $32, and the Wall Street consensus target price was last seen at $33.41. The stock ended Monday’s trading at $28.82 a share.
This top MLP is a very safe way for investors looking for energy exposure, and it is on the Stifel Select List. Energy Transfer L.P. (NYSE: ET) owns and operates one of the largest and most diversified portfolios of energy assets in the United States, with a strategic footprint in all the major domestic production basins.
The company is a publicly traded limited partnership with core operations that include complementary natural gas midstream, intrastate and interstate transportation and storage assets; crude oil, natural gas liquids (NGLs) and refined product transportation and terminaling assets; NGL fractionation; and various acquisition and marketing assets.
Through its ownership of Energy Transfer Operating, formerly known as Energy Transfer Partners, the company also owns Lake Charles LNG, as well as the general partner interests, the incentive distribution rights and 28.5 million common units of Sunoco, and the general partner interests and 39.7 million common units of USA Compression Partners.
Energy Transfer investors receive an outstanding 8.10% distribution. Stifel has a $20 price objective on the shares, which is lower than the consensus figure of $21.50. The stock closed most recently at $15.30 a share.