By: Dividend Sensei
How To Profit From The Rise Of The World’s New Oil Production King
So America is the world’s new swing producer, and rising oil production means that we are no longer at the mercy of a highly unstable region. But what does it mean for long-term income investors?
Well for one thing, the high-yield midstream MLP industry, which owns the majority of the gathering, processing, storage and transportation infrastructure needed by the US oil industry, is set to boom in the coming decade. These partnerships get the majority of their cash flow from long-term, fixed fee contracts and thus are far less commodity senstive than actual oil producers. That’s not to say that all MLPs are created equal, or that some of their cash flow isn’t sensitive to crude prices.
After all, Kinder Morgan (KMI), which helped to start the modern MLP age, famously took on way too much debt and was forced to slash its payout 75% back in December of 2015. However, while investors always need to be selective about what they invest in, there are plenty of great names in the industry with very secure cash flows, strong balance sheets, and excellent long-term payout growth prospects.
Enterprise Products Partners (EPD)
Magellan Midstream Partners (MMP)
Enbridge Inc (ENB)
Energy Transfer Equity (ETE)
Phillips 66 Partners (PSXP)
Holly Energy Partners (HEP)
GasLog Partners (GLOP)
All of these MLPs are currently trading at attractive valuations and are poised to generate years of strong income growth, and market beating total returns over the coming decades.
Thus even though the stock market is at its third highest valuation in history, all these names are excellent places to invest new money today.