Here Are My Top 3 Ultra-Yield Dividend Energy Stocks to Buy Now

Key Points

• Energy Transfer has improved its balance sheet and is now ramping up growth.

• Enterprise Products Parters has a long track record of consistency.

• MPLX is looking to use is balance sheet strength to make acquisitions and drive growth.

• 10 stocks we like better than Energy Transfer ›

The best ultra-yield midstream stocks just don't pay big distributions and have high dividend yields -- they also have predictable cash flows, solid balance sheets, and strong growth project pipelines that will help support higher payouts down the road.

Let's look at three top pipeline stocks that fit this bill.

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1. Energy Transfer: 7.5% yield

Energy Transfer (NYSE: ET) is a great example of a midstream stock that has gotten its act together by strengthening its balance sheet and boosting its distribution coverage ratio. As a result, it is now pushing ahead with a plethora of new growth projects.

Its latest big project is the $5.3 billion Desert Southwest pipeline that will move 1.5 Bcf/d of natural gas from the Permian into Arizona and New Mexico. That comes on top of the multiphase Hugh Brinson Pipeline, which will serve demand from Texas power plants and data centers.

The master limited partnership (MLP) is also close to finally moving forward on its Lake Charles LNG project. It signed offtake contracts, brought in MidOcean Energy as a partner, and is talking with others about taking equity stakes. With liquified natural gas (LNG) exports expected to be one of the fastest-growing parts of the energy sector in the coming years, this adds another potential area of growth for the company.

Energy Transfer will spend $5 billion in growth capital expenditure (capex) this year, up from only $3 billion a year ago, and it has plenty of projects also set to come online in later years. It is targeting mid-teens returns on these investments, which should translate into years of strong cash flow and distribution growth.

The company has also done a great job of improving it balance sheet, with leverage now at the low end of its targeted range. It distribution coverage is also very robust, coming in at 1.7 times based on its distributable cash flow (operating cash flow minus maintenance capital expenditures) last quarter. Its payout has now been raised for 15 straight quarters, and management expects 3% to 5% annual increases going forward.

With 90% of 2025 earnings before interest, taxes, depreciation, and amortization (EBITDA) expected to come from fee-based contracts, Energy Transfer has a steady business with a clear growth runway.

2. Enterprise Products Partners: 6.8% yield

Enterprise Products Partners (NYSE: EPD) is about as steady as they come. The MLP has raised its distribution for 27 consecutive years through a variety of difficult energy and economic environments. More than 80% of its cash flow comes from fee-based contracts, many of which have take-or-pay provisions and inflation escalators. That structure smooths out results, no matter what energy prices are doing.

This has actually been on display this year, as the company has seen some headwinds in various parts of its business. This includes Enterprise feeling pressure in its LPG (liquified petroleum gas) segment after some long-term contracts rolled off to lower rates, and the normalization of spreads negatively impacting its propylene and octane enhancement businesses. Nonetheless, the company has still been able to put up steady results.

At the same time, Enterprise's balance sheet remains in excellent shape. Leverage is just over 3 times, and debt is locked in for an average of 18 years at a low 4.7% rate. Enterprise also funds most of its growth internally, so it doesn't need to rely heavily on issuing new equity. The distribution is also well covered, with a coverage ratio of 1.6 times in Q2.

Meanwhile, Enterprise has also picked up its growth spending. The company will spend between $4 billion and $4.5 billion this year on new projects, compared to only $1.6 billion three years ago. These new investments include LPG exports, NGL pipelines, and new processing capacity.

Returns on invested capital (ROIC) consistently come in around 13%, and with many projects set to come online soon, it should see a nice pickup in growth in 2026. It also recently closed the acquisition of Occidental Petroleum's Midland Basinnatural gas gathering and processing business to expand its presence in the region.

With a nearly 7% yield, strong balance sheet and visible cash flow growth, Enterprise is one of the most reliable long-term income names in the market.

Image source: Getty Images.

3. MPLX: 7.5% yield

MPLX (NYSE: MPLX) is another high-yield stock in the midstream sector to consider. It has grown its distribution by more than 10% in each of the past three years, including a 12.5% hike in 2024. Even with that kind of growth, the payout remained well covered last quarter at 1.5 times. Leverage was just 3.1 times at the end of Q2, leaving it plenty of balance sheet flexibility, which it's begun to use.

The company operates in two segments. Its crude logistics business is tied to its parent Marathon Petroleum (NYSE: MPC), which gives that side of the business stability. Meanwhile, its natural gas and NGL segment is its main growth driver. MPLX handles about 10% of U.S. gas production, and with demand rising from exports and new power generation, it's doubling its growth capex budget to $1.7 billion this year.

It has also been active with acquisitions. MPLX recently announced that it will buy Northwind Midstream for $2.4 billion, which greatly expands its gas treating capacity in the Delaware Basin. It also took full ownership of the BANGL pipeline. These moves expand its footprint and boost its long-term cash flow potential.

With a 7.5% yield, robust coverage ratio, excellent balance sheet, and double-digit payout growth, MPLX is a top high-yield stock to own.

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Geoffrey Seiler has positions in Energy Transfer and Enterprise Products Partners. The Motley Fool recommends Enterprise Products Partners and Occidental Petroleum. The Motley Fool has a disclosure policy.