These 3 Energy Dividend Stocks Are a Win-Win: Cheap Valuations and Growing Payouts

The midstream energy space has long been one of the go-to places for investors looking to find stocks with high yields and growing payouts. In many cases, these companies act largely as energy toll rolls, creating highly visible cash flow streams that help support robust distributions.

What some investors may not realize, though, is that the sector has gone through a major overhaul over the past decade, making midstream stocks much more attractive investment options. By and large, the industry cleaned up its balance sheets by reducing leverage, moving more toward fee-based contracts, increasing distribution coverage ratios, and getting rid of burdensome incentive distribution rights (IDRs), which essentially acted like a tax every time these companies raised their payouts.

At the same time, its energy producer customers also became much more disciplined, focusing on cash-flow generation instead of chasing increased production.

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The kicker, though, is that midstream master limited partnerships (MLPs) trade at a big discount today versus a decade ago when they carried more leverage, slimmer coverage ratios, and IDRs. Between 2011 and 2016, the average MLP traded at an enterprise value-to-EBITDA (earnings before interest, taxes, depreciation, and amortization), or EV/EBITDA, multiple of 13.7 times, while today you can buy top MLPs at a forward multiple of around 11 times or lower. Many also have strong growth prospects, given the rise in energy demand stemming from the artificial intelligence (AI) buildout.

Let's look at three great MLPs with high yields and growing distributions to buy right now.

Energy Transfer: The cheap, high-yield growth stock

Energy Transfer (NYSE: ET) is arguably one of the best bargains in the stock market in any sector. It trades at a forward EV/EBITDA multiple of just above 8.5 times, while having some of the best growth prospects in the space. Meanwhile, it sports a 7% yield and targets increasing its distribution at a 3% to 5% pace moving forward.

Energy Transfer's strong presence in the Permian Basin gives it access to some of the cheapest natural gas in the country, making it one of the go-to pipeline operators for AI data center operators and utilities to turn to for cheap natural gas. As a result, the company has one of the most robust growth project backlogs in the space, including two major natural gas pipeline projects that will take gas away from the Permian. This makes it a great combination of a growth stock with a high yield trading at a cheap valuation.

Enterprise Products Partners: The steady performer

At a forward EV/EBITDA multiple of just above 11 times, Enterprise Products Partners (NYSE: EPD) is one of the pricier MLPs, but the stock has historically traded at a premium due to its consistent nature, highlighted by its increasing its distribution for 27 straight years. The stock currently carries a 5.7% yield and has been growing its payout by around 3% a year.

The company is conservative by nature and has one of the best balance sheets in the space, with leverage of just 3.3 times. 2026 will be a bit of a transition year, but it expects to see double-digit EBITDA and cash-flow growth in 2027 as new projects come online. This is just a solid stock you can sleep well at night owning for the long haul.

MPLX: A high-yielder with big payout increases ahead

If you're looking for a midstream stock with a high yield that is growing its distribution at a fast pace, look no further than MPLX (NYSE: MPLX). The stock currently has a 7.8% yield and has increased its distribution by 12.5% each of the past two years. Best of all, the company said it plans to continue to grow its distribution at a similar pace for the next two years. The stock, meanwhile, trades at an attractive EV/EBITDA multiple of below 11 times.

The company has been working to improve the quality of its assets through both acquisitions and divestitures, with a particular focus on the Permian and Gulf Coast. It also has a strong organic project backlog in the Permian and Gulf Coast, as well as in the prolific Marcellus Shale in the Northeast. With strong growth and a high yield, this is a top income stock to own.

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