3 Top MLPs With Over 5% Yields

Oil - Oil Pipeline in Winter

Master Limited Partnerships, otherwise known as MLPs, are appealing for income investors. MLPs widely offer high distribution yields above 5%. 

Of course, investors should always do their due diligence to make sure the underlying distribution is secure. As a result, investors should seek a balance between yield and safety when it comes to MLPs.

The following 3 Master Limited Partnerships have high yields above 5%, and can grow their distributions over time.

Enterprise Products Partners LP (EPD)

Enterprise Products Partners is a midstream oil and gas storage and transportation company. Enterprise Products has a tremendous asset base which consists of nearly 50,000 miles of natural gas, natural gas liquids, crude oil, and refined products pipelines. It also has storage capacity of more than 250 million barrels. 

Enterprise reported net income attributable to common unitholders of $1.5 billion, or $0.66 per unit on a fully diluted basis, for the first quarter of 2024, marking a 5 percent increase from the first quarter of 2023. Distributable Cash Flow (DCF) remained steady at $1.9 billion for both quarters.

Distributions declared for the first quarter of 2024 increased by 5.1% compared to the same period in 2023, reaching $0.515 per common unit. DCF covered this distribution 1.7 times, with $786 million retained.

In terms of safety, Enterprise Products Partners is one of the strongest midstream MLPs. It has credit ratings of BBB+ from Standard & Poor’s and Baa1 from Moody’s. It also has a high distribution coverage ratio, leaving room for distribution increases and unit repurchases. Enterprise Products’ high-quality assets generate strong cash flow, even in recessions. 

As a result, Enterprise Products has been able to raise its distribution to unitholders for 26 years in a row. EPD currently yields 7.2%.


MPLX is another midstream MLP that operates in two segments. Its first segment is Logistics and Storage, which relates to crude oil and refined petroleum products. The second segment is Gathering and Processing, which stores and transports natural gas and natural gas liquids (NGLs). 

In late April, MPLX reported (4/30/24) financial results for the first quarter of fiscal 2024. Adjusted EBITDA and distributable cash flow (DCF) per share both grew 8% over the prior year’s quarter, primarily thanks to higher tariff rates, but also thanks to increased gas volumes. MPLX maintained a healthy consolidated debt to adjusted EBITDA ratio of 3.2x and a solid distribution coverage ratio of 1.6.

Pipelines tend to have a stronghold in terms of extracting economic rents. Building pipelines requires years of approvals and ongoing regulation. As such, the incumbent positions enjoy “toll-booth” type business models, with a good portion of their revenue fixed via fee-based and “take or pay” agreements. MPLX in particular has a strong position in the Marcellus / Utica region, with long-term contracts from Marathon.

MPLX’s industry generally holds competitive advantages as a result of the toll-booth model of pipelines. While growth potential may be limited, the need for the company’s infrastructure is certainly present. With MPLX in particular we are encouraged by the company self-funding on the equity side and getting rid of the Incentive Distribution Rights. 

The company has had strong distribution metrics in recent years. In the last five years, MPLX’s distribution coverage ratio has not fallen below 1.46 at a minimum. Meanwhile, the company’s total debt to adjusted EBITDA has been generally under 4x over the past five years, which indicates a manageable level of debt.

With a distribution payout ratio of approximately 63% expected for 2024, overall the distribution payout of MPLX appears to be secure. MPLX has increased its payout for 11 consecutive years and units currently yield 8.3%.

Brookfield Infrastructure Partners (BIP)

Brookfield Infrastructure Partners L.P. is one of the largest global owners and operators of infrastructure networks, which includes operations in sectors such as energy, water, freight, passengers, and data. Brookfield Infrastructure Partners is one of multiple publicly-traded listed companies under Brookfield Corporation (BN). 

BIP reported Q1 2024 results on 05/01/24. For the quarter, funds from operations (FFO) rose 11% to $615 million, reflecting organic growth of 7% and contributions related to +$2 billion of new investments, partially offset by the impact of higher interest costs and its ongoing capital recycling program.

FFO per unit came in at $0.78, which was 8.3% higher versus a year ago.

Brookfield’s future growth will be driven in part by new investments. From 2021-2023, BIP invested $7.0 billion in new investments. The utility expects to generate proceeds of ~$2 billion per year from its capital recycling program. BIP targets an FFOPS growth rate of 5-9%.

Stable FFO and a sustainable payout ratio leads to a secure dividend. BIP maintains a solid credit rating of BBB+.

The company defines the payout ratio as distributions paid (inclusive of GP incentive and preferred unit distributions) divided by Funds From Operation, which averaged 70% from 2014-2023. According to this formula, its 2023 payout ratio is 66%, within management’s FFO payout ratio target of 60% to 70%. 

BIP’s FFOPS remains stable even through recessions because of the essential services provided by its diversified infrastructure portfolio. Stable FFO and a sustainable payout ratio leads to a secure dividend.

BIP has increased its dividend for 15 consecutive years and units currently yield 5.7%.

On the date of publication, Bob Ciura did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.