3 Top Midstream Stocks to Buy as 2024 Draws to a Close

Industry Overview - Midstream companies play a crucial role in the energy sector by gathering, processing, transporting, storing, and exporting crude oil, natural gas, and related products, generating stable income through service fees [1] - The midstream sector is experiencing strong performance, driven by anticipated growth due to increased electricity demand from AI data centers [2] Company Highlights Enbridge - Enbridge derives approximately 75% of its EBITDA from oil and natural gas pipelines, providing consistent fee income due to the ongoing importance of carbon fuels [3] - The company has increased its regulated natural gas utilities' contribution to EBITDA from 12% to 22% through acquisitions, reducing oil pipeline exposure from 57% to 50% [4] - Natural gas is seen as a transition fuel, with Enbridge increasing its overall natural gas exposure from 40% to 47% of EBITDA [5] - Enbridge also generates 3% of EBITDA from renewable power assets, indicating a long-term shift towards cleaner energy [6] - The company offers a dividend yield of 6.2%, with a history of annual increases for 30 consecutive years [7] MPLX - MPLX provides a high yield of nearly 8%, significantly above the S&P 500's dividend yield of 1.2% [8] - The company has achieved a 7.7% compound annual growth rate in distributable cash flow since 2020, supporting a 10.7% annual increase in distributions since 2021 [9] - MPLX is expanding its pipeline infrastructure, with projects like the BANGL joint venture pipeline and additional natural gas processing plants expected to enhance growth [10] - The company maintains a strong financial position, with a cash coverage ratio of 1.5 times its payout and a low leverage ratio of 3.4 [11] - MPLX is well-positioned for continued distribution increases in 2025, making it an attractive investment for income and growth [12] Enterprise Products Partners - Enterprise Products Partners is one of the largest midstream companies in the U.S., offering a yield of 6.5% and a 26-year history of annual dividend increases [13] - The company has a strong balance sheet, with liquidity of $5.6 billion and a 5% growth in distributable cash flow in Q3 [14] - Enterprise Products has consistently maintained a cash flow coverage ratio above 1.5 times its dividend since 2018, ensuring sustainable dividend growth [15] - The company has nearly $6.9 billion in projects under construction, expected to drive cash flows higher and support future dividend increases [16]