Pipeline

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Trust is a precarious thing when it comes to investing, especially when it comes to finding those elusive stocks with high yields. It's really hard to find a company that can ensure both a high yield and a dividend or distribution that can actually grow from there. So we asked our energy contributors which of the master limited partnerships out there are actually ones you can trust will not only deliver the returns from a high yield, but will also be able to grow those yields over the long term. Here's what they had to say.

Bob CiuraMidstream oil and gas company Magellan Midstream Partners (NYSE:MMP) is an MLP investors can trust because of its rock-solid yield. It has a long, established track record of increased distributions, and recently extended that streak. On July 23, the company raised its quarterly distribution by 16% year over year, to $0.74 per unit. This makes 53 increases to the distribution since the company's 2001 initial public offering.

Its $2.96-per-unit annualized distribution provides a 4.4% yield right now, which is well ahead of the stock market average. Plus, those regular raises are a useful reminder to investors of the beauty of the midstream model. As it's a primarily oil pipeline operator, Magellan's cash flow is based much more on volumes of liquids stored and transported than on the price of the commodity itself. That provides the company with a great deal of insulation against brutal downturns in the price of oil, which we have seen throughout 2015.

This stability is very valuable in times like these. Magellan's distributable cash flow, a non-GAAP measure often used by MLPs that states the amount of cash generated and available to pay distributions, rose 14% last quarter. Magellan is benefiting from higher shipments of refined products, a consequence of an improving U.S. economy.

Magellan's steadily increasing distribution is a valuable margin of safety in a turbulent market.

Tyler Crowe: If you are looking for a company that you can count on to deliver steady distribution growth over the long haul, then Enterprise Products Partners (NYSE:EPD) needs to be on your radar. After all, how many companies in the master limited partnership space can say that they have increased their distribution every quarter for 11 years straight and are actually on track to become a Dividend Aristocrat? (It's only been public for 17 years, but has raised its distribution every year since its inception.)

There are a couple of reasons that the company is able to consistently churn out growing distribution payments. One is that, unlike many other MLPs, it doesn't have a general partner that takes incentive distribution rights. This actually reduces pressure to pay out all of its available cash in the form of distributions and allows it to put some cash back to work funding new growth without accessing debt or equity markets. Combine this with an investment-grade rating, and Enterprise has some of the lowest costs of capital in the business, which helps generate better long-term value for shareholders.

The second reason that you can rely on the company for those steadily growing distribution payments is that management takes a very prudent approach to growth. The company's backlog of new development projects may not look as robust as that of some other MLPs in the space, but management routinely ensures that these projects fit well into the company's existing infrastructure and will add value to the entire system. This is why we saw the company recently make a de facto swap by selling its offshore pipeline system -- that wasn't connecting to the rest of its network -- and buying assets in the Eagle Ford shale region. These may not be the headline-grabbing deals that others make, but they drive better outcomes and lead to higher distributable cash flow.

With extremely solid financials and a management team that has an excellent track record of increasing value across its entire network, Enterprise is one company you can trust will do right by its unitholders over the long term.

Matt DiLallo: My pick, Williams Partners (NYSE:WPZ), is a bit of a special situation. It's in the process of being bought out by its general partner, Williams Companies (NYSE:WMB), in a stock-for-unit exchange. However, the deal might not be consummated because Williams was offered and has since rejected a buyout bid of its own, which would have required it to abandon its proposed merger with its MLP. It's currently evaluating strategic alternatives, which could yet lead to a deal, or Williams could move forward with its current plan. While all that might sound complicated, there are two possible outcomes, both of which will result in a very compelling future income stream for Williams Partners' investors.

The first scenario is that Williams Companies accepts a buyout bid and Williams Partners stays independent. If that happens, at worst, investors can bank on the current payout rate being maintained for a couple of years. At a current yield of more than 9%, that's not a bad option. However, the combined company has a massive growth backlog of $30 billion in projects, many of which would likely be built within Williams Partners, driving cash flow growth and likely an increased distribution along the way.

On the other hand, if Williams Companies decides that its current plan is the best, it will result in the eventual acquisition of Williams Partners. Under the terms of the merger, each unit of Williams Partners would convert to 1.115 shares of Williams Companies. Given the expected dividend rate once the merger is complete, investors buying today would lock in a dividend rate of 7.7%. While that's a lower rate in the near term, Williams has said that the dividend will grow by 10% to 15% through 2020 thanks to the aforementioned project backlog, so any loss in current yield will be made up, and then some, over the next few years. Furthermore, investors will be more than adequately compensated for the lower yield, as Williams is offering a generous premium for the units it doesn't already own.

The way I see it, investors buying Williams Partners today win no matter what the outcome, making it a high-yielder you can trust.

Bob Ciura has no position in any stocks mentioned. Matt DiLallo owns shares of Enterprise Products Partners. Tyler Crowe owns shares of Enterprise Products Partners and Magellan Midstream Partners. The Motley Fool recommends Enterprise Products Partners and Magellan Midstream Partners. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.