3 Ultra-High-Yield Dividend Stocks I Don't Plan on Ever Selling

Key Points

• Energy Transfer is a great combination of growth, value, and a high yield.

• Enterprise Products Partners is a model of consistency.

• Western Midstream has a 9% yield and a structure built for income-oriented investors.

• 10 stocks we like better than Energy Transfer ›

When I invest for long-term income, one of my favorite spots to look is in the midstream master limited partnership (MLP) space. While there may be a bit of extra paperwork come tax time, the high yields and benefits -- such as much of the distribution income being tax-deferred -- are well worth it.

Let's look at three high-yield MLPs I own that I have no plans to sell.

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Energy Transfer -- 7.5% yield

Energy Transfer (NYSE: ET) is my largest MLP position, and for good reason. Admittedly, the company hasn't always been the most investor-friendly, and it had to cut its distribution back in 2020 to whip its balance sheet into better shape. However, this is a much different company than it was just five years ago.

Its balance sheet is now in a much better position after spending the past few years reducing its leverage and improving its financial position. Management now says this is the strongest balance sheet in the company's history, with leverage sitting at the low end of its targeted range.

Meanwhile, its distribution payout is back above pre-cut levels, and management has now raised it for 14 quarters in a row. Last quarter, its coverage ratio, based on its distributable cash flow (operating cash flow minus maintenance capital expenditure, or capex), was over 2 times, which is about as strong as you'll find in the midstream space.

Growth is back on the table, too. Energy Transfer plans to spend $5 billion this year on new growth projects, up from just $3 billion last year. One of the most notable is the Hugh Brinson Pipeline, which will transport natural gas from the Permian to other areas of Texas to support growing demand coming from data centers.

The company has already signed up one data center customer to directly provide natural gas to an upcoming project, and it is currently in talks with over 60 power plants and more than 200 data centers across 14 states. It also looks ready to move forward with a long-awaited liquified natural gas (LNG) export project, which is one of the fastest-growing areas in the energy market.

Despite Energy Transfer's strong financial position and growth opportunities ahead, it trades at an enterprise-value-to-EBITDA (earnings before interest, taxes, depreciation, and amortization), or EV/EBITDA, multiple of just 8 times. That's a discount both from a historical perspective and compared to peers. Midstream MLPs, as a group, traded at an average multiple of 13.7 times between 2011 and 2016, making the stock look like a great bargain at current levels.

Between its 7.5% yield, its valuation, the upside from new projects, and the much-improved financial profile, Energy Transfer remains a top long-term holding for me.

Enterprise Products Partners -- 7% yield

Enterprise Products Partners (NYSE: EPD) is the type of stock you can build a portfolio around. It's a sleep-well-at-night type of stock and my longest-held position. While the stock currently has a robust 7% yield, the real story is its consistency. The MLP has increased its distribution for 26 consecutive years and counting.

Roughly 85% of its cash flow comes from fee-based contracts, many of which have take-or-pay terms and inflation adjustments. This kind of contract structure helps smooth out cash flow no matter what energy prices are doing.

Enterprise is also conservatively run. The company ended last quarter with leverage of just over 3 times and a distribution coverage of 1.7 times. Enterprise doesn't need to constantly raise capital to fund growth, as it's largely self-funding projects from its cash flow.

Impressively, its debt is locked up for 18 years on average, with a weighted-average interest rate of only 4.7%. That's a valuable asset in today's higher interest rate environment. Meanwhile, since 2020, it's been able to actually lower its unit (share) count through buybacks.

That's not to say that Enterprise won't pursue growth when it sees an opportunity. In fact, the company will spend between $4 billion and $4.5 billion on growth projects this year, up from only $1.6 billion in 2022. It consistently gets a return on invested capital of around 13% for its projects.

For anyone who wants income with very little drama, Enterprise continues to be one of the best names in the space. The stock is also reasonably valued, trading at an EV/EBITDA of just under 10 times.

Image source: Getty Images.

Western Midstream Partners -- 9% yield

Western Midstream (NYSE: WES) carries the highest yield of the trio, but it's not just a high-yielder; it's backed by solid fundamentals. The 9% yield is supported by a 1.2 times coverage ratio based on free cash flow and leverage below 3 times. Meanwhile, the company's infrastructure primarily supports its parent, Occidental Petroleum, which also owns more than 40% of the MLP.

What sets Western Midstream apart is the stability of its cash flows. Much of its revenue is tied to cost-of-service and minimum volume commitments. That structure helps deliver steady results, even when commodity prices are volatile. In short, it's built for income-focused investors.

The company is also focused on steady, manageable growth. It isn't chasing flashy projects -- it's finding ones with good returns that generally support Occidental and its growth plans. Its most notable project in the pipeline is Pathfinder, a large-scale produced-water system expected to be up and running by the start of 2027. It's a $400 million to $450 million investment that should handle over 800,000 barrels of produced water per day and deliver solid EBITDA growth once it's fully online.

Having Occidental as a major stakeholder helps, as it provides strategic alignment and long-term support. For investors looking for a high yield without stretching for it, Western Midstream offers a nice combination of a solid coverage ratio, moderate leverage, and distribution growth. The stock is also attractively valued, trading at an EV/EVITDA of just over 9 times. It's a stock I'm happy to own and plan to keep for the long haul.

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