3 High-Yield Pipeline Stocks to Buy Now and Hold Forever

As the price of oil rises, investors are returning to energy stocks in a big way. There are many great opportunities among regular oil stocks and natural gas stocks. However, midstream plays like pipeline stocks are a strong choice as well, especially for a long-term investment horizon.

Revenue and earnings for pipeline stocks are less volatile than those for exploration and production (E&P) or refining and marketing stocks. At the same time, they are benefiting from long-term growth tailwinds, such as rising demand for natural gas amid the artificial intelligence (AI) data center boom.

In addition to steady, growing bottom lines, pipeline stocks, in particular those that are structured as master limited partnerships (MLPs), pay out almost all of their income in the form of distributions. This gives these stocks high yields, making them attractive to income investors.

Among the scores of high-yield (5% or higher forward dividend yield) pipeline stocks, the following three stand out as strong choices in today's market: Energy Transfer (NYSE: ET), Hess Midstream (NYSE: HESM), and MPLX (NYSE: MPLX).

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Energy Transfer is poised to profit from AI data center boom

Since its founding 30 years ago, Energy Transfer has grown organically and through acquisitions to become one of America's largest midstream energy companies. The MLP owns or has an interest in over 140,000 square miles of midstream energy infrastructure, including 36.4% ownership of the Dakota Access Pipeline, a 50% interest in the Florida Gas Transmission pipeline, as well as extensive holdings within the Permian Basin and other top U.S. oil and gas exploration regions.

Currently, annual distributions from Energy Transfer give shares a forward yield of 7.3%. The MLP has raised payouts for five years straight after temporarily decreasing them during the pandemic. Despite this blip in its distribution track record, much suggests future payouts will steadily increase over time. For instance, over the past year, distributions have increased by around 3.1%.

Another factor pointing to higher future payouts is Energy Transfer's Hugh Brinson Pipeline, set to open this year. The 442-mile project, connecting oil fields in West Texas to existing pipeline infrastructure in the Dallas-Fort Worth metroplex, stands to provide natural gas not just to electric utilities but also directly to AI data centers as well. As management noted during the latest quarterly earnings conference call, projects like this will help the MLP achieve its long-term distribution growth target of 3% to 5%.

Hess Midstream ranks highly in terms of return on capital

Hess Midstream owns pipeline and other midstream assets in the Williston Basin shale oil exploration area of North Dakota. This MLP went public in 2017, and since its IPO, it has never cut its distribution. That's impressive, but that's not the sole reason why you consider it a buy. Currently, shares have a forward distribution yield of around 7.9%.

Hess Midstream has consistently increased its payouts over the past nine years. In more recent years, annual distribution growth has been at or near double-digit percentage levels. Yes, based on the latest commentary from management, Hess is only targeting 5% annual distribution growth through 2028.

However, the MLP is returning capital to shareholders in another way besides cash distributions. Recently, Hess Midstream has regularly engaged in share repurchases. In the long term, share repurchases help to increase the underlying per-share value of a stock. They also increase the amount of per-share distributions MLPs can make over time.

MPLX is a high-yielding stock with a strong distribution growth track record

Formed in 2012 by Marathon Petroleum, MPLX owns and operates a wide variety of midstream energy assets. Much like Energy Transfer, this MLP has exposure to many of America's largest energy-producing regions, including the Permian Basin and the Marcellus Shale.

MPLX also has a long track record of distribution growth. Currently, MPLX has 10 consecutive years of distribution growth under its belt. With a forward distribution yield of 7.4%, distribution growth has averaged 11.6% annually over the past decade. Over the past year, distribution growth has been 12.5%.

RBC analyst Elvira Scotto projects that MPLX's anticipated growth for 2026 and 2027 leaves the MLP positioned to continue raising distributions by 12.5% over each of the next two years.

Thomas Niel has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.