10 Best MLP Dividend Stocks to Buy

In this article, we discuss 10 best MLP dividend stocks to buy.

A master limited partnership (MLP) is a publicly traded limited partnership that mainly engages in energy infrastructure and the real estate sector. Their tax structure and regular cash distribution enable these businesses to raise capital from investors in the market. With the steady growth in energy demand today, MLPs are integral to financing the infrastructure needed to enhance US domestic energy resources.

MLPs are increasingly becoming famous among investors as these securities can diversify their portfolios. These stocks are also popular because of their stable dividend payments. According to a report published by a Texas-based finance company Alerian, which provides transparent master limited partnerships and energy infrastructure benchmarks and analytics, there were no dividend cuts across the firm’s midstream indexes in the first quarter of 2022. This was the third consecutive quarter without any dividend cuts and 12 companies in the index raised their dividends during the quarter. In addition to this, these securities offer high yields, which is mainly rewarding in times of financial instability. Edward Jones, referring to a data by FactSet, mentioned in its report that the Alerian MLP Index has an average yield of 8.1%, compared with a 3.5% yield of the S&P 500 utility index and a 1.9% yield of the broader index, as of October 1.

As the market plummeted this year, MLP stocks are generating positive returns for shareholders. The S&P MLP Index returned 20.35% in 2022, versus a 24.8% decline in the S&P 500, as of the close of October 16. Similarly, the Alerian MLP Index, which tracks the performance of energy infrastructure MLPs, is up 13.77% year-to-date. As energy stocks like Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX), and Shell plc (NYSE:SHEL) are gaining investors’ attention, MLPs are also in focus due to the cash advantages they offer.

Photo by Dan Dennis on Unsplash

Our Methodology:

The companies mentioned below are MLPs and pay dividends to shareholders. We selected these stocks considering their financial health, dividend policies, and overall fundamentals. The stocks are ranked according to their dividend yield, as of October 17.

Best MLP Dividend Stocks to Buy

9. Enterprise Products Partners L.P. (NYSE:EPD)

Dividend Yield as of October 17: 7.60%

Enterprise Products Partners L.P. (NYSE:EPD) is one of the largest MPLs, with headquarters in Texas. On October 5, the company declared a quarterly dividend of $0.475 per share, in line with its previous dividend. The company is one of the best dividend stocks on our list because it has raised its dividends 22 years in a row. As of October 17, the stock’s dividend yield came in at 7.60%.

In Q2 2022, Enterprise Products Partners L.P. reported strong cash generation, with its distributable cash flow coming in at $2 billion, compared with $1.6 billion during the same period last year. The company’s operating cash flow for the quarter also jumped to $2.1 billion, from $1.7 billion in the prior-year quarter. The financial position of the company is stable enough to support its shareholder return.

In June, Truist raised its price target on Enterprise Products Partners L.P. to $30 with a Buy rating on the shares, highlighting the company’s continuous revenue growth over the years.

As of the close of Q2 2022, 23 hedge funds tracked by Insider Monkey owned investments in Enterprise Products Partners L.P., compared with 19 a quarter earlier. These stakes have a combined value of $184.4 million.

Fairholme Capital Management mentioned Enterprise Products Partners L.P. in its Q2 2022 investor letter. Here is what the firm has to say:

“Enterprise Products Partners L.P. (NYSE:EPD) is the largest position in the Fund. Enterprise provides processing and transportation services to producers and consumers of natural gas, natural gas liquids, and oil. These hydrocarbons are critical for modern life and have few if any, ready substitutes. Commodity prices do not greatly affect the company’s toll road fees. Enterprise is priced at less than nine times distributable cash flows and pays a 7.5% cash distribution.”

8. Western Midstream Partners, LP (NYSE:WES)

Dividend Yield as of October 17: 7.67%

Western Midstream Partners, LP (NYSE:WES) is a Texas-based MLP that delivers essential energy and is also involved in the transportation of natural gas and crude oil. In Q2 2022, the company reported an operating cash flow of over $467 million, compared with $276.4 million in the previous quarter. Its free cash flow also jumped to $372 million during the quarter, from $200.3 million in the preceding quarter. The company’s revenue of $876 million showed a 22% growth from the same period last year.

Western Midstream Partners, LP currently pays a quarterly dividend of $0.50 per share, with a dividend yield of 7.67%, as of October 17. The company has raised its dividend five times since 2021, coming through as one of the best dividend stocks on our list.

In August, Wolfe Research initiated its coverage of Western Midstream Partners, LP with a Peer Perform rating, appreciating its balance sheet and high Permian leverage.

The number of hedge funds tracked by Insider Monkey owning stakes in Western Midstream Partners, LP stood at 8 in Q2 2022, growing from 6 in the previous quarter. These stakes have a total value of nearly $57 million. With 1.2 million shares, Arrowstreet Capital was the company’s leading stakeholder in Q2.

7. Energy Transfer LP (NYSE:ET)

Dividend Yield as of October 17: 8.02%

Energy Transfer LP (NYSE:ET) is an American publicly-traded MLP that is engaged in natural gas and propane pipeline transport. The company is one of the best dividend stocks as it has raised its dividends for three consecutive quarters this year. It currently pays a quarterly dividend of $0.23 per share for a dividend yield of 8.02%, as of October 17.

In Q2 2022, Energy Transfer LP reported revenue of $26 billion, up 71.5% from the same period last year. The company’s distributable cash flow (DCF) attributable to partners came in at $1.88 billion, compared with $1.4 billion in the prior-year quarter. This DCF was enough to cover its dividend payments. Its operating cash flow stood at $2.3 billion for the quarter.

 In August, Barclays raised its price target on Energy Transfer LP to $14 with an Overweight rating on the shares, appreciating the company’s fundamentals in this challenging environment.

At the end of Q2 2022, 36 hedge funds in Insider Monkey’s database owned stakes in Energy Transfer LP, up from 31 in the previous quarter. The collective value of these stakes is nearly $599 million. Abrams Capital Management owned the largest position in the company in Q2.

6. Sunoco LP (NYSE:SUN)

Dividend Yield as of October 17: 8.33%

Sunoco LP (NYSE:SUN) is an American MLP that is engaged in the distribution of motor fuels. The company distributes fuels to over 7,300 gas stations that are owned by third parties. In June, Mizuho upgraded the stock to Buy with a $44 price target. The firm mentioned that the company’s flexible business model should prove resilient in the current environment and its balance sheet is also well-positioned to acquire third-party assets.

Sunoco LP currently pays a quarterly dividend of $0.8225 per share. As of October 17, the stock’s dividend yield came in at 8.33%.

At the end of Q2 2022, 2 hedge funds tracked by Insider Monkey owned stakes in Sunoco LP, the same as in the previous quarter. These stakes have a total value of $285,000. PEAK6 Capital Management was the company’s leading stakeholder.

In addition to popular stocks like Exxon Mobil Corporation, Chevron Corporation, and Shell plc (NYSE:SHEL), Sunoco LP can be a valuable addition to dividend portfolios.

5. Magellan Midstream Partners, L.P. (NYSE:MMP)

Dividend Yield as of October 17: 8.39%

Magellan Midstream Partners, L.P. (NYSE:MMP) is an Oklahoma-based partnership that specializes in ammonia and petroleum pipelines in the Mid-continent oil province. In August, the company announced the expansion of its refined petroleum products pipeline system to El Paso, Texas. It expects to spend over $125 million on the project, which will be completed by 2024.

Magellan Midstream Partners, L.P. is one of the best dividend stocks on our list as the company has been raising its dividends consistently for the past 20 years. It currently pays a quarterly dividend of $1.0375 per share and has a dividend yield of 8.39%, as of October 17. In Q2 2022, the company reported a strong cash position, with its free cash flow of $649 million, compared with $507 million during the same period last year. For FY22, Magellan Midstream Partners, L.P. expects to generate a free cash flow of $1.45 billion, or $578 million after distributions.

Ahead of the company’s Q3 results, Barclays reiterated its Equal Weight rating on Magellan Midstream Partners, L.P. in October.

At the end of Q2 2022, 9 hedge funds tracked by Insider Monkey owned stakes in Magellan Midstream Partners, L.P., compared with 11 in the previous quarter. These stakes have a total value of over $17.7 million. First Eagle Investment Management was the company’s leading stakeholder in Q2.

4. Crestwood Equity Partners LP (NYSE:CEQP)

Dividend Yield as of October 17: 9.00%

Crestwood Equity Partners LP (NYSE:CEQP) is a Texas-based MLP that owns and operates midstream assets. The company is also engaged in the transportation and storage of natural gas and crude oil. In Q2 2022, the company reported revenue of $1.45 billion, which showed a 56% growth from the same period last year. Its net income for the quarter also jumped to $39.4 million, from $38.1 million in the prior-year quarter. The company’s distributable cash flow to common unitholders amounted to $108.1 million.

Crestwood Equity Partners LP currently pays a quarterly dividend of $0.655 per share, with a dividend yield of 9.00%, as recorded on October 17. The company last raised its dividend in April 2022, which was its first dividend hike after the pandemic.

In May, Truist initiated its coverage on Crestwood Equity Partners LP with a Buy rating and a $36 price target.

At the end of Q2 2022, PEAK6 Capital Management was the only hedge fund having stakes in Crestwood Equity Partners LP, valued at $37,000.

3. MPLX LP (NYSE:MPLX)

Dividend Yield as of October 17: 9.00%

MPLX LP (NYSE:MPLX) is an Ohio-based diversified MLP that owns and operates midstream energy infrastructure and logistics assets. The company is one of the best dividend stocks on our list as it has been raising its dividends consistently for the past eight years, with a five-year CAGR of 5.70%. It currently pays a quarterly dividend of $0.705 per share for a yield of 9.00%, as of October 17.

In the second quarter of 2022, MPLX LP reported a strong financial position as it announced a share repurchase program worth $1 billion. The company generated $1.5 billion in operating cash flow, up from $1.1 billion during the same period last year. It returned $750 million to shareholders through dividends and share repurchases, which shows its stable cash flow.

In September, BofA maintained its $34 price target on MPLX LP, which implies a 10% upside. The firm raised concerns about the company’s execution in the coming quarters.

At the end of June 2022, 7 hedge funds in Insider Monkey’s database owned stakes in MPLX LP, compared with 8 in the previous quarter. These shares are collectively valued at over $39 million. Citadel Investment Group is the leading stakeholder of the company in Q2.

2. CrossAmerica Partners LP (NYSE:CAPL)

Dividend Yield as of October 17: 11.04%

CrossAmerica Partners LP (NYSE:CAPL) is an American MLP that distributes branded petroleum for motor vehicles in the country. In Q2 2022, the company reported strong results and a solid cash position. Its distributable cash flow for the quarter stood at $32.4 million, compared with $25 million in the prior-year quarter. The company’s revenue of $1.48 billion showed a 72.2% year-over-year growth. At the end of June, it had $3.5 million in cash and cash equivalents and $135.4 million in total current assets.

CrossAmerica Partners LP has paid regular dividends to shareholders since 2015. The company does not have a dividend growth streak but its payments remained consistent even during the pandemic. It currently pays a quarterly dividend of $0.525 per share, with a dividend yield of 11.04%, as of October 17.

At the end of Q2 2022, Citadel Investment Group was the only hedge fund holding stakes in CrossAmerica Partners LP, with a total value of $228,000.

1. USA Compression Partners, LP (NYSE:USAC)

Dividend Yield as of October 17: 11.84%

USA Compression Partners, LP (NYSE:USAC) is a publicly-traded MLP that mainly provides natural gas compression services under term contracts. The company also manages its compression units and maintains related inventory.

In Q2 2022, USA Compression Partners, LP reported an operating cash flow of over $94.2 million, compared with $99.5 million during the same period last year. The company’s distributable cash flow came in strong at $55.6 million, up from $52.5 million in the prior-year quarter. Its total revenues of $171.5 million showed a 9.5% year-over-year growth.

USA Compression Partners, LP currently pays a quarterly dividend of $0.525 per share for a dividend yield of 11.84%, as recorded on October 17. In July, Mizuho initiated its coverage on the stock with a Neutral rating and an $18 price target, calling the firm one of the largest domestic providers of natural gas compression.

At the end of Q2 2022, PEAK6 Capital Management was the only shareholder of USA Compression Partners, LP, owning stakes worth $427,000.

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This article is originally published at Insider Monkey.