High-yielding master limited partnerships (MLPs) had a tough 2017, with the average one in the Alerian MLP ETF dropping 14.4% last year. Because of that, analysts at Credit Suisse see upside across much of the sector, believing that several high-yield stocks can outperform in 2018. However, there are a few high-yielders that they don't like right now, with the following four standing out as the most bearish ones to start 2018:

High-yield stock

Current Yield

Current Price

Price Target

Implied upside

Buckeye Partners (BPL)





Holly Energy Partners (HEP)





Magellan Midstream Partners (MMP)





Tallgrass Energy GP (TGE)





Data source: YCharts and Bloomberg. Current price as of Jan. 8, 2018.

Here's a look at why these high-yield stocks could head lower this year, and one that looks much more appealing right now.

Businessman collecting money swimming underwater, wearing formal clothes.

You might be underwater quickly if you go diving after these high-yield stocks. Image source: Getty Images.

Heading in the wrong direction

Buckeye Partners is coming off a rough 2017, with the global terminal operator losing more than a quarter of its value, which pushed its yield close to double digits. One of the drivers of the decline is that the company's financial metrics have deteriorated over the past year. For example, Buckeye's distribution-coverage ratio dropped from 1.09 times in 2016 to a concerning 0.99 times over the past year.

Likewise, its leverage ratio has risen from 4.10 times in 2016 to an elevated 4.43 times. That's mainly because the company spent $1.15 billion to buy a 50% stake in VTTI's global marine terminal business, and then subsequently bought out VTTI Energy Partners for another $237 million. While Buckeye expects these deals to create value over the long term, investors worry that the company might need to cut its lucrative dividend to get its financial metrics back on solid ground. If it does, units could take another tumble in 2018.

Running out of fuel?

Holly Energy Partners delivered a peer-crushing total return of about 9% last year, though most of that was from its lucrative distribution, since units only rose about 1%. Fueling that outperformance was the company's ability to deliver distribution growth of 8.4%, which was higher than its 8% guidance.

However, investors and analysts have concerns about the company's ability to continue increasing its payout at such a high rate given that the coverage ratio dipped below 1.0 times last quarter and it has a higher leverage ratio of 4.33 times. If the company needs to halt distribution growth to improve these metrics, that could weigh on the valuation this year.

Scissors cutting a $100 bill in half.

Your investment could get cut into a smaller size with these pipeline companies. Image source: Getty Images.

A premium MLP with a matching price tag

Magellan Midstream Partners has some of the best financial metrics among MLPs, with a leverage ratio of less than 3.5 times and distribution coverage of 1.25 times. Because of that and the growth projects the company has underway, it expects to boost its distribution another 8% this year.

However, investors are paying a premium price for this top-tier MLP since it currently trades for 16.2 times distributable cash flow (DCF). For comparison's sake, Buckeye Partners and Holly Energy Partners sell for around 10.5 and 13.3 times DCF, respectively. Because of its premium price tag, Magellan could lose value again in 2018.

One high-priced high-yield stock

Tallgrass Energy GP trades at an even higher valuation of 19.7 times cash flow, which makes it one of the more expensive pipeline stocks around. Investors are willing to pay such a premium for the company because it's rapidly growing its payout, with it jumping 35.2% last year.

More growth should be on the way since its MLP recently made several acquisitions, which should increase the cash flowing to Tallgrass Energy GP. That said, given how cheaply other fast-growing pipeline stocks trade at these days, it seems like Tallgrass Energy GP is a bit too pricey, and might have trouble keeping its premium valuation this year.

A close-up of a stack of $100 bills.

This high-yield stock could deliver big gains. Image source: Getty Images.

There's a better option out there

All four of these high-yield stocks have things that could weigh them down this year, which is why investors might want to avoid them for the time being. One option to consider instead is Enbridge Energy Partners (EEP). Not only does it offer a higher yield than any in this group, at 10.9%, but that payout is on solid ground since Enbridge Energy Partners expects to cover it with cash flow by 1.2 times.

Further, while Enbridge Energy Partners has an elevated leverage ratio at the moment, the MLP anticipates it dropping to a more comfortable 4.0 times by 2020, even as the company increases its payout by 3% per year. The reason investors get such an attractive yield is that Enbridge Energy Partners sells for a dirt-cheap price of just 9.4 times distributable cash flow. That combination of a safe and growing high yield for a ridiculously low valuation makes this MLP worth considering.