2 High-Yield Energy Stocks to Buy Now and Hold Forever

The recent spike in oil and gas prices is driving many investors back toward energy stocks. However, many energy stocks are tightly tethered to volatile commodity prices -- and hopping aboard that bandwagon at the wrong time can lead to years of unrealized losses.

If you want to avoid that volatility, it's smarter to stick with the midstream companies that merely transport oil, natural gas, natural gas liquids, and other refined products through their pipelines. By charging upstream exploration companies and downstream refineries "tolls" to use their pipes, midstream pipeline operators can generate stable profits without fretting over gas and oil prices. They also generate plenty of cash to fund their high distributions and dividends.

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Therefore, conservative income investors should buy high-yielding midstream stocks that will profit from the skyrocketing demand for energy while still generating stable profits. Two of the top midstream stocks fit that description: MPLX (NYSE: MPLX) and Oneok (NYSE: OKE).

MPLX

MPLX, which operates over 10,000 miles of crude oil and light product pipelines across 14 states, was carved out of Marathon Petroleum (NYSE: MPC) in 2012. It was created as a master limited partnership (MLP), which blends a return of capital with its own income to pay out distributions that are generally higher and more tax-efficient than regular dividends. Investors can also use the MLP's tax losses to passively reduce their own taxable income. However, the trade-off is that investors must file a separate K-1 tax form for MLPs.

MPLX pays a forward yield of 7.7%, and it's raised its annual distribution for 12 consecutive years. MLPs fund their distributions with distributable cash flow (DCF), so they can continually raise payouts as long as DCF doesn't eclipse it.

From 2020 to 2025, MPLX's DCF rose from $4.3 billion to $5.8 billion, while its coverage ratio (its DCF to distributions ratio) dipped from 1.5x to 1.4x. Therefore, MPLX can comfortably raise its hefty distributions for the foreseeable future.

From 2025 to 2028, analysts expect its earnings per unit (EPU) to increase at a 3% CAGR from $4.82 to $5.28. That growth should be driven primarily by expanding infrastructure in the Permian Basin and the Marcellus region. At $55, it still looks like a screaming bargain at 12 times this year's EPU -- and its high yield should limit its downside.

Oneok

Oneok operates more than 60,000 miles of pipeline across 15 states. It previously operated as two different companies: a C corporation and an MLP. In 2017, it acquired and absorbed the MLP and restructured itself as a C corporation, which didn't require any additional tax forms.

From 2020 to 2025, Oneok's adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) surged from $2.72 billion to $8.02 billion, while its earnings per share (EPS) increased from $1.42 to $5.42. It's raised its payout for the past four consecutive years.

From 2025 to 2028, analysts expect its EPS to increase at a 10% three-year CAGR to $7.15. That should easily cover its forward annual dividend of $4.28 per share, translating to a forward yield of nearly 5%. That growth should be fueled by the digestion of several large acquisitions (Magellan, Enlink, and Medallion), the increased production of natural gas liquids in the Permian Basin, and overseas exports of liquefied natural gas from the Gulf of Mexico.

At $85, Oneok's stock still looks like a bargain at 14 times this year's earnings. If you're looking for a simple pipeline play that isn't as complicated as an MLP, Oneok checks all the right boxes.

Leo Sun has no position in any of the stocks mentioned. The Motley Fool recommends Oneok. The Motley Fool has a disclosure policy.