2 No-Brainer High-Yield Energy Stocks to Buy Right Now, Starting With Energy Transfer

Amid all the artificial intelligence (AI) brouhaha, it's difficult to find stocks that benefit from the data center build-out that aren't overpriced yet deliver a high-yielding dividend.

Energy Transfer (TXSE: ET) and Enterprise Products Partners (NYSE: EPD) are the exceptions. The two midstream energy master limited partnerships (MLPs) are key components of U.S. energy infrastructure. Their pipelines help transport, process, and export natural gas, natural gas liquids (NGLs), and crude oil.

If you're concerned about an AI bubble, these two midstream pipeline companies are in a great position to ride one out without denting your portfolio.

Image source: Getty Images.

They have safe, juicy dividends

At a time when the S&P 500 (SNPINDEX: ^GSPC) average dividend is only 1.06%, Energy Transfer has a dividend that yields 6.69% at its current price, while Enterprise Products has a yield of 5.99%, superior to its closest energy competitors.

Their adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) stem from fee-based, long-term contracts. This insulates their cash flow from short-term fluctuations in commodity prices, ensuring consistent revenue regardless of volatility in the crude oil or natural gas markets.

Enterprise Products Partners has increased its dividend for 28 consecutive years, including a 2.7% increase this year.

Energy Transfer doesn't have as long a history of consecutive yearly dividend raises, just four years, but it has been particularly aggressive in raising its dividend of late, including 19 consecutive quarterly raises.

Both companies maintain healthy distribution coverage ratios. Enterprise Products Partners' was 1.9x in the second quarter, while Energy Transfer's was 2.2x, leaving ample excess cash after distributions to fund expansion and preserve balance sheet integrity.

They benefit from multiple tailwinds

Increasing electricity requirements from AI-driven data centers, manufacturing reshoring, and grid electrification are creating structural tailwinds for natural gas. Both companies hold dominant pipeline footprints connecting major supply basins directly to gas-fired power generation markets. Yet when you compare them to competitors, they are trading at lower multiples, below 14 times trailing earnings, making them even more attractive.

In addition to their pipelines, each company has liquefied natural gas (LNG) and NGL export facilities along the Gulf of Mexico.

Enterprise Products Partners' operations stretch from the Gulf to Canada, transporting and storing natural gas, LNG, NGL, and crude oil, with more than 50,000 miles of pipelines; more than 300 million barrels of storage capacity for NGL, crude oil, petrochemicals, and refined products; and 14 billion cubic feet of natural gas storage capacity.

Energy Transfer owns more than 140,000 miles of pipelines and energy infrastructure across 44 states.

They are showing strong earnings

In the second quarter, Energy Transfer reported net income of $2.09 billion, up 80.1% year over year, and adjusted EBITDA of $5.07 billion, a rise of 31% over the same period a year ago. Distributable cash flow rose 32% year over year to $2.59 billion. The company also increased its yearly adjusted EBITDA guidance to between $18.8 billion and $19.1 billion, up from the previous range of $18.2 billion to $18.6 billion.

Enterprise Product Partners reported record net income, distributable cash flow, and adjusted EBITDA in the second quarter. Net income was $1.8 billion, up 28% year over year. DCF was $2.3 billion, up 21% from the same quarter a year ago. Adjusted EBITDA was $2.8 billion, up 17% year over year.

James Halley has no position in any of the stocks mentioned. The Motley Fool recommends Enterprise Products Partners. The Motley Fool has a disclosure policy.