6 High-Yield MLPs to Buy Now

Ellen Chang
·4 min read

Midstream companies can provide above-average yields.

Companies structured as master limited partnerships, known as MLPs, offer tax benefits due to their pass-through earnings. Midstream energy industry stocks can provide attractive yields from companies operating pipelines that transfer crude oil and natural gas from the producers of these raw materials to the refiners who convert them into products used by consumers and other industries. Investors who want more income should consider adding energy infrastructure stocks, including MLPs, since they provide dividend yields of 6% or more, which is significantly higher than the 1.5% dividend yield of the S&P 500, says Rob Thummel, senior portfolio manager at TortoiseEcofin. Here are six MLPs to add to your portfolio.

MPLX (ticker: MPLX)

MPLX is a midstream energy logistics firm that transports and stores gas and refined petroleum products. The company is a large-cap master limited partnership formed by Marathon Petroleum Corporation (MPC) and reported first-quarter net income of $739 million. The company is a "well-run MLP with an exceptional management team that offers investors a 9% dividend yield," Thummel says. "With the S&P 500 trading at record highs, most investors are expecting a return of 8% to 10% from an investment. The management team is top notch and the company has been buying back shares with excess cash flow." The dividend yield is 9.37%.

Cheniere Energy Partners (CQP)

Cheniere Energy Partners was formed by Cheniere Energy (LNG) and reported a first-quarter net income of $347 million. Cheniere Energy Partners owns and operates the Sabine Pass liquefied natural gas terminal located in Cameron Parish, Louisiana, which has natural gas liquefaction facilities consisting of five operational liquefaction trains and one train that is under construction. Cheniere Partners also owns the Creole Trail Pipeline, which interconnects the Sabine Pass LNG terminal with several large interstate pipelines. Cheniere Energy is the second-largest LNG operator and fourth-largest LNG supplier globally with a proven track record of execution and operations, says Michael Underhill, chief investment officer of Capital Innovations in Pewaukee, Wisconsin. "The long-term view on natural gas and LNG is supported by approximately $1 trillion of investments being made globally in long-lived gas infrastructure," he says. The dividend yield is 5.9%.

Dorchester Minerals (DMLP)

Dorchester Minerals is a Dallas-based company that owns producing and nonproducing natural gas and crude oil royalty properties throughout 26 states. The company generates steady cash flow as it drills for in-demand fossil fuels and reported first-quarter net income of $11.8 million. Dorchester Minerals said it recently acquired overriding royalty interests in the Bakken trend totaling approximately 6,400 net royalty acres under 63,000 gross acres in Dunn, McKenzie, McLean and Mountrail counties, North Dakota. Distributions fluctuate each quarter based on the amount of crude oil and natural gas produced. The dividend yield is 9.43%.

CrossAmerica Partners (CAPL)

CrossAmerica is a wholesale and retail distributor of motor fuels and is based in Allentown, Pennsylvania. The company distributes gas to approximately 1,700 locations and either owns or leases more than 1,000 of those gas stations. CrossAmerica provides gasoline to major companies such as Exxon Mobil Corp. (XOM), BP (BP), Royal Dutch Shell (RDS.A), Chevron Corp. (CVX), Sunoco (SUN), Valero (VLO), Gulf, Citgo, Marathon Petroleum and Phillips 66 (PSX). The company reported first-quarter adjusted earnings before interest, taxes, depreciation and amortization of $20.7 million and cash flow of $15.8 million, compared to adjusted EBITDA of $25.3 million and cash flow of $20.4 million in the first quarter of 2020. In April, CrossAmerica said it would acquire 106 convenience store locations from 7-Eleven for $263 million as part of its divestiture plan when it acquired the Speedway business from Marathon Petroleum. CAPL provides a yield of 10.87%.

Hoegh LNG Partners (HMLP)

Based in Bermuda, Hoegh LNG Partners is an MLP that provides floating LNG services and issues long-term contracts. The partnership owns and operates floating storage and regasification units that act as LNG import terminals. The company reported first-quarter net income of $23.8 million and limited partners' interest in net income of $20 million compared to net income of $5.5 million and limited partners' interest in net income of $1.8 million for the first quarter of 2020. The dividend yield is 9.88%.

USA Compression Partners (USAC)

USA Compression Partners provides compression services to oil and gas companies that produce fossil fuels but need to process those energy sources for ease of transportation. The company works mostly with fracking firms that extract oil and gas by injecting pressurized liquid into subterranean rock. USA Compression Partners reported first-quarter net income of $400,000 in 2021, compared with a net loss of $602.5 million for the first quarter of 2020. USA Compression Partners also reported net cash was $39.6 million for the first quarter of 2021, compared with $50.1 million for the first quarter of 2020. The dividend yield is 12.53%.

High-yield MLPs to buy now:

-- MPLX (MPLX)

-- Cheniere Energy Partners (CQP)

-- Dorchester Minerals (DMLP)

-- CrossAmerica Partners (CAPL)

-- Hoegh LNG Partners (HMLP)

-- USA Compression Partners (USAC)