7 Best MLP Stocks to Buy Now
By: Ned Piplovic,
Investors who enjoy tax benefits of limited partnerships but would also like to have at their disposal liquidity of publicly traded securities can have it all by investing in Master Limited Partnerships (MLPs). However, what are the best MLP stocks to buy?
MLPs issue units that are publicly traded on security exchanges like the shares of stocks. The MLPs have two types of partners: general partners who are company owners that manage the daily operations of the partnership and limited partners who provide the capital for a partnership’s operation by buying partnership units.
In addition to potential capital growth on the investment, limited partners also receive distributions, which are equivalent to dividends paid by a C corporation. To identify the best MLP stocks to buy, let’s focus on evaluating MLPs from the extended horizon viewpoint. Under that criterion, we will define the best MLP stocks to buy as those with high yields and long records of rising annual or quarterly distributions.
Investors who are interested in doing their own research to find MLPs that better fit their own investment portfolio strategy can find a complete MLP Directory with available filter and sort functionality on DividendInvestor.com. The following seven MLPs were chosen based on the highest distribution yields and their record of consecutive distribution hikes. All entries on this list – which happen to be from the Energy sector – yield more than 7% and have hiked their total annual distributions at least 10 consecutive years.
7 Best MLP Stocks to Buy Now: #7
Energy Transfer Equity, L.P. (NYSE:ETE)
ETE sells and transports natural gas to electric utilities, independent power plants, local distribution companies and other end-users.
The current $0.305 quarterly distribution corresponds to a $1.22 annualized payout and currently yields 7.03%, which outperformed the 4.8% average yield of the company’s peers in the Oil & Gas Pipelines segment by more than 46%.
ETE maintained an average annual growth rate of more than 18% over the past 11 consecutive years and advanced its total annual distribution 635% over that period. While flat for 2018 and over the trailing 12 months, the unit price rose more than 25% since its 52-week low in early April 2018.
7 Best MLP Stocks to Buy Now: #6
TC PipeLines, L.P. (NYSE:TCP)
TCP has interests in eight natural gas interstate pipeline systems for natural gas transportation primarily in the Western, Midwestern and Eastern United States. The company’s unit price lost half of its value between late January and late May 2018. However, the units price erased some of those losses and gained 50% between its late-May low and early September 2018.
TCP’s current $0.65 quarterly distribution yields 7.76% at its present unit prices and an annualized total distribution of $2.60. After boosting its annual distribution for the past 15 consecutive years, TCP advanced its annual payout amount almost 180%, which corresponds to an average growth rate of 5.7% per year.
7 Best MLP Stocks to Buy Now: #5
Spectra Energy Partners L.P. (NYSE:SEP)
SEP engages in storage and transportation of natural gas in the United States. After trading flat for two years, the partnership’s unit price lost more than a third of its value in the first half of 2018. However, after bottoming out at the beginning of June, the unit price reversed its trend, recovered nearly half of its losses and gained more than 24% over the subsequent 90 days.
SEP’s current streak of consecutive distribution hikes stands at 43 consecutive quarters. During this streak, SEP enhanced its total annual distribution amount 155%, which is equivalent to an 8.4% growth rate per year – or 2.2% every quarter. This level of growth culminated in the current $0.764 quarterly distribution, which is 1.7% higher than the previous quarter’s $0.751 payout. This new quarterly payout amount corresponds to $3.06 annualized and currently yields 8.11% – 73% higher than the industry segment’s average.
7 Best MLP Stocks to Buy Now: #4
TransMontaigne Partners L.P. (NYSE:TLP)
TLP provides storage and transportation for companies involved in distribution of crude oil, refined petroleum products, chemicals, fertilizers and other liquids. The unit price fluctuated mostly in the $35 to $45 range over the past 30 months. Over the trailing 12 months, the unit price initially declined more than 22% towards its 52-week low in early March 2018 but reversed direction after the March bottom and recovered 37% of those losses by early September 2018.
The current $0.795 quarterly distribution is 1.3% higher than the $0.785 payout from the previous period and 7.4% above the $0.74 payout from the same quarter last year. TLP has boosted its annual distribution every year since 2005, including the last 12 consecutive quarterly hikes. The current 8.24% yield is 75% above the 4.7% average yield of the entire Oil & Gas Pipelines industry segment.
7 Best MLP Stocks to Buy Now: #3
Holly Energy Partners L.P. (NYSE:HEP)
HEP owns and operates petroleum product and crude oil pipelines, storage tanks, distribution terminals and refineries in 10 U.S. states west of the Mississippi river. After trading in a narrow range between $30 and $35 for more than five years, the unit price fell to $26.50 in mid-March 2018. Since the March bottom, the unit price rose more than 10% to close on September 10, 2018, at $29.17, which was just 2.77% short of the bottom limit of its five-year trading range.
The current $2.64 annual distribution payout yields 9.06%, which is 92% above the 4.7% average yield of all the companies in the Oil & Gas Pipelines industry segment. Over the past 13 years, HEP tripled its annual distribution, which corresponds to an average annual growth rate of nearly 9%.
7 Best MLP Stocks to Buy Now: #2
Energy Transfer Partners L.P. (NYSE:ETP)
ETP engages in transportation and storage of natural gas and crude oil products. The partnership’s $0.565 quarterly distribution is 2.7% above the $0.55 payout from the same period the previous year. The annualized $2.26 distribution yields 10.17%. Over the past 16 years of consecutive annual distribution hikes, ETP managed to maintain an average growth rate of more than 15% per year and advanced its total annual distribution amount nearly 10-fold.
After reaching its 52-week low at the end of November 2017, the unit price reversed trend and advanced more than 20% by September 10, 2018. The unit price growth combined with the 10%-plus yield to reward limited partners with a total return of more than 30% over the past 12 months – in contrast to small total losses over the past three and five years.
7 Best MLP Stocks to Buy Now: #1
Buckeye Partners LP (NYSE:BPL)
BPL owns and operates liquid petroleum products pipeline systems and also operates marine terminals and merchant services. While declining for most of the trailing 12 months, the September 10, 2018, unit price is 12.6% higher than the 52-week low on July 26.
However, BPL has enhanced its annual distribution for 20 consecutive years. The total annual payout grew at an average growth rate of 4.5% every year for two decades. BPL’s current $1.2625 quarterly distribution corresponds to a $5.05 annualized amount and a 13.75% yield.
While its unit price did not perform as well as some of the other MLPs on this list – Energy Transfer Partners for example – a 13.75% current yield and two decades of annual distribution boosts are the top results according to our previously defined evaluation criteria. Therefore, Buckeye Partners takes the top spot on the best MLP stocks to buy now list to lead six other excellent performers.
Dividend hikes and dividend decreases, new dividend announcements, dividend suspensions and other dividend changes occur daily. To make sure you don’t miss any important announcements, sign up for our E-mail Alerts. Let us do the hard work of gathering the data and sending the relevant information directly to your inbox.
In addition to E-mail Alerts, you will have access to our powerful dividend research tools. Take a quick video tour of the tools suite.
Ned Piplovic is the assistant editor of website content at Eagle Financial Publications. He graduated from Columbia University with a Bachelor’s degree in Economics and Philosophy. Prior to joining Eagle, Ned spent 15 years in corporate operations and financial management. Ned writes for www.DividendInvestor.com and www.StockInvestor.com.