3 Great High Yield Stocks to Buy Now and Hold for the Long Term | Colorful fool
The midstream MLP space is looking very attractive right now.
One of the best places to find attractive high yield stocks is in the midstream. Midstream limited companies (MLPs) are currently trading at historically attractive valuations with some of the best growth opportunities in the space in a long time due to growing energy needs from artificial intelligence (AI) and overseas natural gas exports.
Let’s take a look at three high-yield pipeline stocks to buy now and hold for the long term.
Image source: Getty Images.
1. Energy transfer (yield 8.1%)
With a yield higher than 8%, Energy transfer (AND +0.98%) is an ideal stock for income-oriented investors looking for some solid growth potential. The company’s distribution is well covered by its distributable cash flow (operating cash flow minus maintenance capital expenditures) and the company’s balance sheet is in the best shape it’s ever been. In addition, it also has the highest percentage of contracts with “take or pay” clauses in its history, meaning it gets paid whether customers use its services or not.
Today’s Change
(0.98%$0.16
Current price
$16.43
Key data points
Market capitalization
56 billion dollars
Daily range
$16.26 -$16.50
Range 52 weeks
$14.60 -$9:45 p.m
Volume
18 million
Avg. flight
14M
Gross margin
12.85%
Dividend yield
8:00 a.m%
With one of the largest integrated midstream systems in the US and a huge presence in the Permian Basin, one of the cheapest sources of natural gas in the US, Energy Transfer is also one of the best-positioned midstream companies to benefit from the growing AI-driven demand for natural gas. It already has a number of growth projects lined up that capitalize on this opportunity, including direct deals with data center operators and builders.
2. Enterprise Product Partners (yield 6.7%)
Enterprise Product Partners (EPD +0.03%) has been arguably the best-run and most consistent MLP this century. The company has always operated conservatively and has been able to increase its distribution for 27 consecutive years, even in challenging economic and energy market conditions.
The company’s balance sheet is a huge asset with just 3.3x leverage and debt held for an average of more than 17 years at a low weighted average interest rate of just 4.7%. Meanwhile, typically more than 80% of its gross operating income comes from fee-based activities, and most of its assets are tied to market-driven demand (demand), which is much more reliable and predictable.
Enterprise Product Partners
Today’s Change
(0.03%$0.01
Current price
$32,53
Key data points
Market capitalization
70 billion dollars
Daily range
$32.44 -$32.79
Range 52 weeks
$27.77 -$34.63
Volume
2.8 million
Avg. flight
4M
Gross margin
12.74%
Dividend yield
6.64%
While the company has seen some pressure this year due to the termination of a lucrative contract and a return to normal in some commodity spreads, it has a large backlog of growth projects coming on stream this year and in 2026 that should help fuel growth. It will then reduce its capital budget in 2026, giving it an opportunity to further increase its distribution, pay down debt and buy back shares.
3. Western Midstream (Yield 9.3%)
If you are looking for a sustainable high yield stock, Western Midstream Partners (WES +0.00%) is a great option. It also has one of the best balance sheets in the midstream, with leverage of just 2.8 times, and its distribution is also well covered, with the company generating $397.4 million in free cash flow and paying out $355.3 million in distributions.
Western Midstream Partners
Today’s Change
(0.00%$0.00
Current price
$39.00
Key data points
Market capitalization
16 billion dollars
Daily range
$39.00 -$39.46
Range 52 weeks
$33.60 -$43.33
Volume
1.3 million
Avg. flight
1.6 million
Gross margin
53.34%
Dividend yield
9.24%
Nor is Western’s 9.3% yield a sign that the company isn’t growing or doing well. It posted record EBITDA last quarter and projected it would be at the high end of its estimated annual range of $2.35 billion to $2.55 billion. It also has two growth projects in the first half of 2027: the North Loving II processing plant and the produced water Pathfinder Pipeline. In addition, it recently completed the acquisition of Arris Water Solutions, as the company expects water solutions to be a growth driver for it going forward.
Western is trying to grow its distribution around the mid-single digits, but thinks it could have an opportunity to grow it at an even higher rate when the big projects come online. However, given the already high yield, it may increase redemptions instead.