The stock market briskly backed off its all-time high over the past month, selling off in a rather dramatic fashion. Some stocks have really taken it on the chin, with high-quality energy midstream MLPs Enterprise Products Partners (EPD -0.41%), MPLX (MPLX 0.26%), and Williams Partners (NYSE: WPZ) standing out since they're all down double-digits from their peaks earlier this year. That steep decline has pushed their yields up toward 7%, which makes them even more compelling options for income-seekers.
There's plenty more where that came from
MPLX has declined about 11% from its peak earlier this year even though it reported exceptional fourth-quarter results last month. The pipeline and processing company produced $1.6 billion of distributable cash flow last year, which was a jaw-dropping 43% more than it pulled in during 2016, as it completed several needle-moving acquisitions. That growth enabled the company to increase its distribution to investors by 12.1% last year, while still covering it by a comfortable factor of 1.28. As a result of the payout increase, and the recent drop in the company's valuation, MPLX now yields an attractive 7%.
Image source: Getty Images.
As nice as that yield is now, MPLX has plenty of growth ahead to push it higher. Thanks to the wave of acquisitions last year, and expansion projects it has underway, the company believes it can increase its payout by another 10% this year while maintaining a healthy coverage ratio of more than 1.2. Hitting that goal would push the yield for investors buying today up to 7.3%. And with a low leverage ratio and the ability to completely self-fund the expansion projects it has underway this year, MLPX boasts one of the highest-quality financial profiles among MLPs.
Already on top but still growing safer
Rivaling MPLX for the top spot among MLPs is Enterprise Products Partners, which has one of the highest credit ratings in the sector. Its distributable cash flow also comfortably covered its distribution by a factor of 1.2 last year. However, despite this rock-solid financial profile, Enterprise has tumbled this year, falling more than 15% from its high, which pushed its distribution yield up to 6.9%.
Like MPLX, Enterprise expects to increase its already-generous payout this year thanks to the recent completion of $4.5 billion of organic growth projects. The company isn't raising its payout as fast as it could, but that's because it chose to retain more cash to internally finance future expansion projects since it has $5.5 billion more on the way. That move, however, only makes its high-yield payout safer in the long run.
Image source: Getty Images.
Restarting the growth engine
Williams Partners has endured the steepest slide of this trio, falling 17.5% from its peak earlier in the year. As a result, the natural gas pipeline MLP yields nearly 6.7%. However, as is the case with its peers, that payout is on solid ground since 97% of Williams Partners' earnings come from stable sources like fee-based contracts. Its distribution coverage ratio was 1.23 last year, and the MLP has a much-stronger balance sheet after reducing debt by $2.8 billion in 2017.
Meanwhile, after resetting its payout early last year to shore up its financial situation, Williams Partners expects to start raising it again this year, with the company aiming for 5% to 7% growth in 2018 and 2019, while maintaining a comfortable coverage level of 1.2. Furthermore, it has several opportunities coming down the pipeline that position it to continue increasing the payout in 2020 and beyond.
The chance to lock in some fantastic income streams
Enterprise, MPLX, and Williams tumbled this year after getting dragged down by a sell-off in the stock market. As a result, their dividend yields have risen to around 7%, which is an attractive level considering that these are high-quality companies with excellent financials. In fact, all three expect to be able to increase their already high-yielding payouts this year thanks to the cash flow growth they expect. That's an opportunity income-seeking investors won't want to miss.
