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Master Limited Partnerships, otherwise known as MLPs, are appealing for income investors. That is because most MLPs have high distribution yields.The following 3 Master Limited Partnerships have high yields above 6% and solid prospects for growing their distribution payouts in the years ahead.
Sunoco LP (SUN)
Sunoco distributes a range of fuel products through its wholesale and retail business units. The wholesale unit purchases fuel products from refiners and sells those products to both its own and independently owned dealers.Sunoco reported its first-quarter earnings results on May 15. Revenues totaled $5.5 billion during the quarter, which was 3% more than the revenues that Sunoco generated during the previous year’s quarter. This was a better year-over-year performance compared to the previous quarter.Adjusted EBITDA was up 10% year over year, improving to $242 million during the quarter. Sunoco’s distributable cash flows totaled $176 million during the quarter, which was 10% higher compared to the previous year’s quarter, and which equated to DCF of $2.07 per share, which covered the dividend easily.For 2024, Sunoco is forecasting EBITDA of $1.46 billion to $1.52 billion to account for the acquisition of NuStar Energy.The company profits from significant scale and revenue consistency. In Texas, Sunoco is one of the largest independent fuel distributors, and Sunoco is also among the top distributors of Chevron, Exxon, and Valero-branded motor fuel in the rest of the United States. In the fuel wholesale industry, scale is important, as increased scale allows for higher margins and a better negotiating position with suppliers.SUN units currently yield 6.1%.
Enterprise Products Partners LP (EPD)
Enterprise Products Partners is a midstream oil and gas storage and transportation company. Enterprise Products has a tremendous asset base which consists of nearly 50,000 miles of natural gas, natural gas liquids, crude oil, and refined products pipelines. It also has storage capacity of more than 250 million barrels.In the 2024 first quarter, EPD reported net income attributable to common unitholders of $1.5 billion, or $0.66 per unit on a fully diluted basis, up 5% year-over-year. Distributable Cash Flow (DCF) remained steady at $1.9 billion for both quarters.Distributions declared for the first quarter of 2024 increased by 5.1% compared to the same period in 2023, reaching $0.515 per common unit. EPD had a distribution coverage ratio of 1.7x.Enterprise has positive growth potential moving forward, thanks to new projects and exports. It has several billion dollars’ worth of major capital projects currently under construction. They expect all of these projects to come online in the coming years, boosting cash flows.Enterprise Products has tremendous competitive advantages, primarily its vast network of assets. It would be enormously costly to build out a network of pipelines and terminals large enough to compete with Enterprise Products. EPD has increased its distribution to unitholders for 26 years in a row and the units currently yield 7.1%.
Energy Transfer LP (ET)
Energy Transfer LP owns and operates one of the largest and most diversified portfolios of energy assets in the United States. Operations include natural gas transportation and storage along with crude oil, natural gas liquids and refined product transportation and storage totaling 83,000 miles of pipelines.In the 2024 first quarter, ET grew its volumes in all the segments and achieved record crude oil transportation volumes. As a result, distributable cash flow grew 17% over the prior year’s quarter. Energy Transfer posted a healthy distribution coverage ratio of 2.2 and raised the quarterly distribution by 1%, on top of the distribution hikes in each of the nine previous quarters.Thanks to strong growth in the demand for its networks, Energy Transfer improved its already strong guidance for 2024. It raised its guidance for adjusted EBITDA from $14.5-$14.8 billion to $15.0-$15.3 billion. This guidance implies 11% growth at the mid-point.Energy Transfer has a healthy backlog, with the expectation to spend about $2.9 billion in growth capital expenditures this year. A great portion of these capital expenses are for projects that are expected to begin delivering cash flows until the end of next year. The growth projects and the acquisitions of Energy Transfer will also be growth drivers.ET’s distribution has been restored above the pre-pandemic level and is currently well-covered by cash flows, with a coverage ratio of 2.2. Therefore, in the absence of another steep economic downturn, the 7.8% forward distribution yield should be considered safe.More By This Author:High Dividend 50: Ethan Allen Interiors, Inc.
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