Money Morning is a big fan of MLPs for their reliability and great dividend yields. That's precisely why we're always on the lookout to uncover the top MLPs.
We've recommended MLPs like Energy Transfer LP (NYSE: ET) and Magellan Midstream Partners LP (NYSE: MMP) in the past for their dividend yields. But the best MLP we've picked for this week has both growth potential and pays nearly a 7% yield.
Master limited partnerships (MLPs) are firms that rely on commodities like oil and natural gas to generate revenue. What makes them great for investors, though, is their tax advantages, reliability, transparent business models, and consistent distributions, according to Money Morning Oil & Energy Investing Strategist Dr. Kent Moors.
MLPs aren't required to pay the same corporate taxes as other companies. Rather, the profits they make are distributed straight to investors. With no corporate taxes, a greater amount of potential distributions can be paid out to investors - known as limited partners. That's why MLPs can pay out high dividend yields in comparison to other stocks.
Since MLPs are often found in the midstream oil sector - profiting from the storage and transportation of oil and natural gas throughout pipelines - they're typically stable investments. This is even more true for MLPs operating in the United States. According to YCharts, the U.S. is the world's largest oil producer, with a record-breaking 12.9 million barrels per day.
Even better, the U.S. Energy Information Administration reports that the United States will grow its barrels per day to 14 million from now until 2040. So, U.S. MLPs' stability will continue to benefit income-minded investors for decades to come.
Of course, while MLPs typically offer great dividend yields, income-seeking investors often struggle to find MLPs that also have excellent growth potential.
That's why we're bringing your one of the top MLPs of the week.
It not only has an incredible 7% dividend yield, but it could also soar 110%
The Top MLP to Buy This Week Pays a Nearly 7% Yield
[mmpazkzone name="in-story" network="9794" site="307044" id="137008" type="4"]
Enterprise Products Partners LP (NYSE: EPD) is our pick for the top MLP to buy today.
It is a Houston-based oil and gas midstream MLP that delivers services to consumers and producers of crude oil, natural gas, and natural gas liquids.
What makes this MLP appealing is the fact that it is one of North America's largest MLPs, with a $57.8 billion market cap. By comparison, other MLPs like Magellan and Sunoco LP (NYSE: SUN) have market caps of $13.9 billion and $2.61 billion, respectively.
EDP has turned a profit for the last 12 years and is involved in every form of oil drilling and production to the midstream space, which makes up the bulk of its operations.
The company has been able to remain competitive and grow its operations in the midstream sector thanks to its 260-million-barrel storage capacity and its pipelines stretching 51,000 miles. It moved 14.5 trillion cubic feet through those pipelines in just the first three quarters of 2019. Over this same period, Enterprise produced 6.6 million barrels.
This equates to 643% more storage capacity than other large MLPs like Energy Transfer, which can hold 35 million barrels.
In October 2019, Enterprise announced that it was going to expand its operations. Specifically, it would use its Eagle Ford Shale pipeline to connect its ECHO Terminal to its Midland, Texas, storage location. This would give the company an additional 450,000 barrels per day of capacity.
But that's not the only expansion happening at Enterprise. The company is also boosting its capacity to 190,000 barrels per day from 145,000 barrels per day by bringing its Appalachia-to-Texas (ATEX) ethane pipeline online.
Sure, these expansions come at a cost and are likely one of the reasons that shares of EPD have fallen after it missed its Q3 2019 earnings projections. But this is far from a concern considering how these projects are positioning the company for future growth.
You see, EPD is a massive oil and gas company that now has assets across tens of thousands of miles of this country. As U.S. oil production continues to expand, Enterprise stands to make billions in revenue thanks to its solid infrastructure.
The company's revenue has hit $33.97 billion so far in 2019, and it has reported $4.8 billion in profits. Next year alone, Enterprise is expected to produce $39.46 in revenue, an increase of 16%.
Several MLPs in this sector have also consolidated in recent years, both internally and externally. As this trend continues, this could also present opportunities for additional growth in the coming years for one of the largest players in this industry.
This is an MLP that gives you a twofold benefit - growth plus an impressive yield.
The stock continues to trade near its 52-week low of $26.08, giving investors the perfect opportunity to buy.
The price/earnings (P/E) ratio on the stock is only 12, meaning it is grossly undervalued compared to the 19.7 historical average P/E ratio and the 25.17 five-year high P/E ratio.
With a combination of revenue growth, stability, and earnings forecasts, this is a company that can quickly rebound from the current levels. If the share price jumps back up to the average P/E ratio again, the potential gain is roughly 64% to $42.77 per share.
If it heads further north toward its peak 25.17 P/E ratio to $54.71 per share, the potential share price gains jump to 110%.
Add the impressive 7% dividend yield on top of these gains, and you have an excellent MLP to buy now.
Anyone Can Become an Angel Investor with as Little as $50
Angel investing used to be off-limits to the average American... but Shark Tank's Robert Herjavec said it best during this live broadcast: "The walls have finally come down. You no longer have to be rich, famous, or powerful to become an angel investor!"
Congress has now made it possible for you to take advantage of these life-changing deals.
By becoming an angel investor, you can be right there - one of the first to invest in the next Steve Jobs, the next Bill Gates, or the next Elon Musk.
And because you're there at the beginning, the upside is infinitely greater.
For so long, regular folks have been locked out... but not anymore. Click here for details...