Pipeline operators with strong cash flow, steady growth projects, and well-covered payouts can be the backbone of an income portfolio. Let's look at three master limited partnerships (MLPs) that offer ultra-high yields, dependable operations, and steady growth. To begin investing in these names, $1,000 is a great starting point. But these have the type of steady operations that you can also feel free to dollar-cost average into over time.
Energy Transfer -- 7.6% Yield
Energy Transfer (ET -0.72%) is entering its next phase of growth with plenty of projects in its pipeline. The company recently announced the $5.3 billion Desert Southwest pipeline, a project that will transport natural gas coming from the Permian Basin to the Arizona and New Mexico markets. Backed by long-term contracts, it will be part of Energy Transfer's expanding Transwestern network and is expected to be online by late 2029. That's on top of its multiphase Hugh Brinson Pipeline, which will help serve power plants and data centers in Texas.
The company is also making progress on its long-awaited Lake Charles LNG export project, having now partnered with MidOcean Energy and secured several offtake deals. It is still looking for more equity partners before it green-lights the project, but it's getting close. With about $5 billion in growth capital expenditures (capex) this year -- half aimed at natural gas projects -- Energy Transfer is positioning itself to capture growing demand from both LNG (liquified natural gas) exports and energy-hungry data centers.
Meanwhile, its financial foundation is solid. Leverage is at the low end of its targeted range, and it had a robust distribution coverage ratio of 1.7x last quarter based on its distributable cash flow (operating cash flow minus maintenance). Management has raised the distribution for 15 straight quarters, including a recent 3% increase, and expects 3% to 5% annual growth moving forward. With nearly 90% of 2025 earnings before interest, taxes, depreciation, and amortization (EBITDA) from fee-based contracts, this is a steady income generator with big growth optionality.
Enterprise Products Partners -- 7% Yield
Enterprise Products Partners (EPD -1.27%) is the definition of a reliable income stock. The company has increased its distribution for 26 consecutive years while having a strong coverage ratio and keeping leverage in check. About 80% of cash flow comes from fee-based contracts, many with take-or-pay provisions and inflation escalators, ensuring stability in any energy environment.
Enterprise is conservatively run, with leverage just over 3x and debt locked in for an average of 18 years at only 4.7%. It self-funds most of its growth, avoiding the need for constant equity issuance. Meanwhile, it had a robust distribution coverage ratio of 1.6x in the second quarter.
The company is also seeing strong growth opportunities. It will spend between $4 billion and $4.5 billion in growth capex this year, which is a significant jump from the $1.6 billion it spent in 2022. With most of its growth projects set to come online this year or next, Enterprise should start to see accelerating growth next year. Overall, Enterprise offers solid income, stability, and a clear runway for growth.
Image source: Getty Images.
Western Midstream -- 9.5% Yield
Western Midstream (WES -0.49%) delivers the highest yield of the group, but its payout is anchored by steady cash flows and disciplined management. The company is backed by parent Occidental Petroleum, which owns over 40% of the partnership. Western Midstream benefits from a strategic alignment with its parent company, as its contracts with Occidental are heavily tied to cost-of-service and minimum volume commitments (MVCs). This gives it a highly visible cash-flow stream.
The company is also starting to ramp up growth, with a focus on expanding its produced water business. Its two largest projects are the Pathfinder produced water system, which will handle over 800,000 barrels per day when it comes online in 2027, and the expansion of its North Loving natural gas processing plant.
Western Midstream also recently agreed to acquire Aris Water Solutions (ARIS -0.17%) in a $2 billion deal. The acquisition is expected to be immediately accretive and brings with it over 625,000 acres of dedications, significant MVCs, and an expected $40 million in cost synergies.
Financially, Western Midstream is in solid shape with 2.9x leverage. Management plans to keep leverage at around 3x, even as it increases growth spending, while maintaining mid-single-digit distribution growth over the long term. However, it is looking to grow its profitability more quickly than its distribution to help bolster its distribution coverage ratio.
Western Midstream combines strong assets, clear growth drivers, a disciplined capital allocation strategy, and, most of all, a very robust yield that is sure to make any income-oriented investor happy.
