This Top MLP to Buy Pays a 6.8% Dividend Yield and Could Grow 117%

It's no secret that we're fans of MLPs here at Money Morning. That's why we're always on the hunt for a top MLP to buy.

In the past, we've talked about firms like Magellan Midstream Partners LP (NYSE: MMP) and Energy Transfer LP (NYSE: ET) for their great dividend yields.

MLPs are investments focused on commodities like natural resources, especially oil and gas pipelines. What makes them appealing is their consistent cash distributions and tax advantages.

MLPs don't need to pay corporate taxes. Instead, they distribute their profits directly to investors. No corporate taxes mean greater potential distributions can be paid out to limited partners, like you. That's how MLPs can offer higher dividend payouts than traditional stocks.

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Because MLPs operate in the midstream sector - making money from the transportation and storage of oil along pipelines - they're stable investments. This is especially true in the United States, as the country has grown into the world's largest oil producer with a record-breaking 12.6 million barrels per day, according to data from YCharts.

And the EIA reports that U.S. oil production is expected to grow to 14 million barrels per day through 2040 - meaning U.S. MLPs will continue to offer stable profits for income-seeking investors.

While MLPs are known for their excellent dividend payouts, investors have struggled to find MLPs with serious growth potential.

That's where this week's best MLP to buy comes into play.

Not only does it yield a massive 6.8%, but it has the potential to soar 117%...

This Top MLP to Buy Now Pays a 6.8% Dividend Yield

[mmpazkzone name="in-story" network="9794" site="307044" id="137008" type="4"]One of the best MLPs to buy now is Enterprise Products Partners LP (NYSE: EPD).

What makes EPD a great MLP to buy is the fact that it's one of the largest MLPs in North America, with a market cap of $57.8 billion. To put that into perspective, other MLPs like Sunoco LP (NYSE: SUN) and Magellan have market caps of $2.61 billion and 13.9 billion, respectively.

And with its hands in everything from the midstream space to even the oil drilling and production space, EDP has been profitable for the last 12 years.

What has helped this company grow and remain a top contender in the midstream sector is its 51,000 miles of pipelines and its storage capacity of 260 million barrels. In the first three quarters of 2019 alone, it transported 14.5 trillion cubic feet of oil over its pipelines. It also produced 6.6 million barrels in the same period.

That's 643% more storage space than another great MLP like Energy Transfer - which has a storage capacity of 35 million barrels.

On Oct. 4, 2019, EPD also announced it was expanding to connect its Midland, Texas storage facility to its ECHO Terminal through its Eagle Ford Shale pipeline. EPD says the pipeline will have an initial expanded capacity of 450,000 barrels per day.

And that's on top of another expansion of its Appalachia-to-Texas (ATEX) ethane pipeline that'll increase its capacity from 145,000 barrels per day to 190,000 barrels per day.

These projects are bound to benefit the company in the long run. Because EPD is such a massive oil firm in both production and the midstream space - with tens of thousands of miles across the United States - it could easily make billions more from growing U.S. oil production.

The expenses from these expansions may have been why EPD shares dropped following its missed earnings call for Q3 2019, but we're not worried about such a safe and stable oil firm, especially as oil production in the United States is on the rise.

You see, EPD has turned rising oil production into bigger profits.

So far in 2019, EPD's revenue is $33.97 billion with a net income of $4.8 billion. And EPD's revenue is forecasted to rise 16% to $39.46 billion next year.

And you can buy into a profitable, dividend paying MLP like this one for a song right now.

Since EPD is trading at $26.08, near its 52-week low, its price/earnings ratio (P/E) is a mere 12. This means it's considered extremely undervalued compared to its historical average P/E ratio of 19.7 and its 5-year high of 26.1.

With its earnings forecasts, revenue growth, and overall stability as a company, we think its valuation could jump back up sooner than later. If its share prices grow enough to hit its average P/E ratio of 19.7, the stock could gain 64.2% to $42.80.

If it were to reach its peak P/E ratio of 26.1 again, it could potentially soar 117.5% to $56.72 per share.

That's a pretty impressive potential gain for a well-established, blue-chip MLP. And with a great dividend yield of 6.8%, EPD could be a great MLP to profit off of the American oil market.

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About the Author

Daniel Smoot is a Baltimore-based editor who helps everyday investors with stock recommendations and analysis. He regularly writes about initial public offerings, technology, and more. He earned a Bachelor's degree from Towson University.

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