5 Brilliant High-Yield Midstream Stocks to Buy Now and Hold for the Long Term

Key Points

• The midstream sector is benefiting from increased natural gas demand.

• There are several strong stocks in the space with yields between 4% and 10%.

• Not only do these stocks have high yields, but their distributions are also well covered and rising.

• 10 stocks we like better than Energy Transfer ›

Midstream operators aren't flashy, but they crank out dependable cash flow, fund generous distribution payouts, and are set to benefit from surging demand for natural gas tied to artificial intelligence (AI), data centers, and liquid natural gas (LNG) exports.

Here are five high-yield stocks with growing distributions that also have solid upside potential.

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Energy Transfer (yield: 7.4%)

Energy Transfer (NYSE: ET) has a hefty 7.4% yield that's well covered by its distributable cash flow -- operating cash flow minus maintenance capital expenditures (capex) -- thanks to about 90% of earnings before interest, taxes, depreciation, and amortization (EBITDA) coming from fee-based contracts. Many of those contracts are take-or-pay, locking in revenue regardless of volumes.

Energy Transfer's footprint in the Permian Basin in Texas positions it to benefit directly from growing power demand and LNG exports. As such, the company is shifting into growth mode, bumping its capex from $3 billion in 2024 to $5 billion this year.

It's seeing strong requests related to the data center boom and recently signed a supply agreement with developer Cloudburst for one of the data center projects it is developing in Texas. Also, the long-stalled Lake Charles LNG project looks like it may finally move forward, adding a growth driver.

All in all, Energy Transfer is a high-yield name with strong tailwinds.

Enterprise Products Partners (yield: 6.8%)

Enterprise Products Partners (NYSE: EPD) has hiked its payout for 26 straight years. Its robust distribution and high yield aren't just safe; they are anchored by one of the steadiest business models and best balance sheets in the space. Roughly 85% of its cash flow comes from fee-based contracts, and many of those include take-or-pay terms with inflation escalators.

Enterprise is run conservatively, but it also knows when to pursue expansion. The company currently has $7.6 billion in growth projects, with $6 billion of that set to go live this year. It has also boosted its spending on such projects, taking it from $3.9 billion last year to as much as $4.5 billion this year.

If you want a sleep-safe high-yield stock, Enterprise is the right choice.

Western Midstream (yield: 9.4%)

Western Midstream Partners (NYSE: WES) offers a huge 9.4% yield and backs it up with a rock-solid balance sheet. Its leverage ratio sits below a multiple of 3, and its cash flows are anchored by cost-of-service contracts and minimum volume commitments. That makes for consistent results, even in choppy markets.

Management is targeting mid-single-digit annual increases in its distributions while investing in select expansion opportunities. The biggest is the Pathfinder produced-water system (to clean up water that's a by-product of drilling), which could top $450 million in cost and should start ramping up in 2026.

Western doesn't have a huge growth opportunity in front of it, but if you're looking for a high, safe yield, it's a great option.

MPLX (yield: 7.5%)

MPLX (NYSE: MPLX) has been delivering some of the strongest distribution growth in the midstream space the past few years, growing its payout by double digits for three years running. Despite that, its distribution is still covered 1.5 times by cash flow, and its balance sheet is in great shape with leverage at just 3.3 times. That's extremely attractive for a stock with a 7.5% yield.

The company's growth is being driven by its natural gas and NGL (natural gas liquids) segment, which handles about 10% of U.S. production. With natural gas demand from LNG exports and AI accelerating, the company is doubling its expansion capex to $1.7 billion in 2025.

Its other moves include taking full ownership of the BANGL pipeline and partnering with Oneok in a joint venture to integrate their NGL export infrastructure to offer end-to-end services.

Meanwhile, its crude oil logistics business is anchored by its parent, Marathon Petroleum, giving this segment strong visibility. This is a high-yield stock with a well-covered and rising distribution that is positioned for the long term.

Image source: Getty Images.

Kinder Morgan (yield: 4.1%)

Kinder Morgan's (NYSE: KMI) 4.1% yield is the lowest here, but the company has the biggest natural gas footprint, with roughly 40% of U.S. natural gas flowing through its system. About 80% of its cash flow comes from volumetric fee-based contracts, with about 64% of its cash flow tied to take-or-pay contracts. That helps give it a steady base.

The company is also seeing strong expansion opportunities. Its project backlog surged to $8.8 billion last quarter, up from $3 billion just a year ago. Over 70% of that is tied to power demand, with much of the new buildout targeting AI-related data centers and LNG facilities.

These projects are expected to generate strong returns, with management citing 16.7% EBITDA yields on new spending. At the same time, Kinder has also cleaned up its balance sheet in recent years, cutting its leverage multiple from 5.1 in 2017 to 4 in 2024. With new natural gas export demand coming from Asia, Mexico, and Europe -- and domestic power needs rising fast -- Kinder is in the right place at the right time.

The stock should continue to be a solid performer in the coming years.

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