Rising interest rates are providing income-seeking investors with a lot more attractive options these days. CDs and Treasuries pay around 5%, while many dividend stocks offer even higher-yielding payouts.
One place where dividend yields are particularly enticing these days is among energy master limited partnerships (MLPs). Many of these entities offer yields in the high single digits. Several MLPs also have excellent track records of steadily increasing their payouts.
Three MLPs that income-seeking investors won't want to miss are Enterprise Products Partners (EPD +1.09%), Delek Logistics Partners (DKL +0.02%), and MPLX (MPLX +0.27%).
A quarter-century of steady income growth
Enterprise Products Partners is one of the largest midstream companies in the country. It operates pipelines, processing plants, petrochemical complexes, storage terminals, and export facilities. Those assets generate very stable cash flow backed primarily by government-regulated rate structures and long-term, fixed-rate contracts.
That steady cash supports the MLP's 7.5%-yielding distribution, which is several times higher than the S&P 500's dividend yield (currently around 1.6%). It can turn a $1,000 investment into about $75 of annual passive income at that rate.
NYSE: EPD
Key Data Points
Enterprise Products Partners has increased its payout for 25 consecutive years. That growth should continue. The company recently placed $2.5 billion of expansion projects into service and expects to complete another $4.1 billion over the next few years. They'll supply it with growing cash flow as they come online.
The company also has lots of financial flexibility to make acquisitions as opportunities arise. Last year, it spent $3.2 billion to acquire Navitas Midstream and another $160 million to purchase 560 miles of pipelines and related assets. The growth from future acquisitions and organic expansion projects should give the MLP the fuel to continue increasing its high-yielding payout.
A model of consistency
Delek Logistics Partners is an MLP formed by refiner Delek US Holdings. The company operates pipelines and other midstream assets to support Delek and other customers. Those assets generate predictable cash flow backed by long-term contracts. That gives it the money to fund a very attractive distribution that yields 9.9%.
NYSE: DKL
Key Data Points
The MLP has increased that payout for 42 straight quarters. It intends to continue steadily growing the distribution. The midstream operator has good financial flexibility, allowing it to continue investing in expanding its network. It will purchase midstream assets from Delek US Holdings in drop-down transactions, make third-party acquisitions, and invest in organic expansion projects.
Delek Logistics Partners most recently acquired 3Bear Energy for $624.7 million in cash last year. That acquisition helped diversify its operations while giving it a platform for future growth.
Over a decade of growth under its belt
MPLX is another MLP formed by a refiner (Marathon Petroleum). It operates logistics assets to support its parent's operations and third-party customers backed by long-term contracts. The steady cash flows from those commercial agreements support its 8.9%-yielding distribution.
NYSE: MPLX
Key Data Points
MPLX has increased its distribution every year since its formation in 2012. It should have plenty of fuel to continue growing its distribution.
The MLP is currently investing to expand its natural gas and natural gas liquids long-haul and crude oil-gathering pipelines. It's also building several more natural gas processing plants. This new infrastructure should come online through 2025, supplying it with incremental cash flow to increase its distribution.
MPLX also has a strong balance sheet, allowing it to make acquisitions as opportunities arise. It has acquired other MLPs and logistics assets from its parent and third-party sellers over the years.
These already sizable payouts should continue rising
Enterprise Products Partners, Delek Logistics Partners, and MPLX pay high-yielding distributions. Even better, these MLPs have excellent track records of steadily increasing their payouts, which seems likely to continue. All this makes them attractive options for those seeking investments that can boost their income.
