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The Smartest High-Dividend Energy Stocks to Buy With $1,000 Right Now
EPDEnterprise Products Partners L.P.(EPD) The Motley Fool·2025-05-21 01:32

Core Viewpoint - The midstream energy sector presents high-yield stock opportunities for income-focused investors, with a 1,000investmentbeingasuitablestartingpoint[1]Group1:MidstreamEnergySectorOverview−Pipelinecompaniesarelikenedtoenergytollroads,havingminimalexposuretoenergyprices,butlowerenergypricescanleadtoreducedvolumesandpotentialcontractrenegotiations[2]−Themidstreambusinessiscapitalintensive,resultingincompaniescarryingdebt,indicatingthatthesestocksarenotrisk−freeinvestments[2]Group2:EnergyTransfer−EnergyTransferoffersahighyieldof7.31,000 investment being a suitable starting point [1] Group 1: Midstream Energy Sector Overview - Pipeline companies are likened to energy toll roads, having minimal exposure to energy prices, but lower energy prices can lead to reduced volumes and potential contract renegotiations [2] - The midstream business is capital intensive, resulting in companies carrying debt, indicating that these stocks are not risk-free investments [2] Group 2: Energy Transfer - Energy Transfer offers a high yield of 7.3% and a low forward EV-to-EBITDA multiple of 8.1 times, significantly below the historical average of 13.7x for midstream MLPs [4] - The company has improved its leverage post-pandemic and currently has its highest percentage of take-or-pay contracts, ensuring revenue regardless of customer usage [5] - Energy Transfer is increasing its growth capex from 3 billion to 5billion,withgrowthprojectsexpectedtocomeonlinelatethisyearornext[6]Group3:EnterpriseProductsPartners−EnterpriseProductsPartnershasconsistentlyincreaseditsdistributionfor26years,supportedbyafee−basedbusinessmodelandtake−or−paycontracts[8]−Thecompanyplanstoincreaseitsgrowthcapextobetween5 billion, with growth projects expected to come online late this year or next [6] Group 3: Enterprise Products Partners - Enterprise Products Partners has consistently increased its distribution for 26 years, supported by a fee-based business model and take-or-pay contracts [8] - The company plans to increase its growth capex to between 4 billion and 4.5billion,with4.5 billion, with 6 billion in projects expected to come online this year [9] - The stock trades at a forward EV-to-EBITDA multiple of 10 times, with a yield of 6.6%, making it a stable option for long-term investors [10] Group 4: MPLX - MPLX has a strong balance sheet with a leverage ratio of 3.3 times and a distribution coverage ratio of 1.5 times, having grown its distribution by over 10% annually for the past three years [11] - The company operates in natural gas and NGL services, as well as crude oil logistics, with growth opportunities primarily in the natural gas segment [12] - MPLX is expanding through acquisitions, including the purchase of the remaining 55% interest in the BANGL pipeline system, enhancing its strategic position [13] - The stock has a yield of 7.4% and a forward EV-to-EBITDA multiple of 10.3 times, indicating reasonable valuation [14]