Key Points
If you’re searching for high-yield stocks with growing dividends, the midstream space is one of the best places to look. The sector is ripe with these types of stocks, and pipeline master limited partnerships (MLPs) continue to trade at historically attractive valuations despite the sector’s strong performance in 2026.
Even better, the sector is seeing a growth resurgence due in part to the artificial intelligence (AI) data center build-out. AI data centers consume a lot of power, and midstream companies are the energy toll roads that process and transport the natural gas used to generate that power. This is leading to an increasing number of high-return projects in the space.
Missed AI’s “Act 1”? Act 2 Could Be 15x Bigger. Most investors think they missed the AI boat because they didn’t buy Nvidia in 2005. But according to our analysts, we’re only at the end of “Act 1″—the R&D phase. “Act 2” is the global rollout. Continue »
Two of the most attractive high-yield stocks in the midstream space are Energy Transfer (NYSE: ET) and Enterprise Products Partners (NYSE: EPD). Here’s why.
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1. Energy Transfer
In the pipeline space, Energy Transfer is one of the biggest beneficiaries of the AI infrastructure build-out. The company is one of the country’s natural gas transporters and has access to low-cost Permian Basin natural gas. The company plans to spend up to $5.9 billion on growth projects this year, including two major Permian natural gas takeaway projects: the Hugh Brinson (phase 1 now in service) and the Desert Southwest pipelines.
These projects are all backed by long-term commitments, and Energy Transfer is forecasting that it will have 5 to 6 times EBITDA build multiples. That means a $1 billion project would generate $165 million to $200 million in incremental EBITDA per year. That’s a solid return.
In addition to its solid growth outlook, Energy Transfer also sports a 6.4% yield and plans to raise its distribution at a 3% to 5% annual pace moving forward. Its payout is well covered by its distributable cash flow (operating cash flow minus maintenance capex), with a 2.2x coverage ratio last quarter, while its balance sheet is in solid shape. About 90% of its business comes from fee-based activities, although it frequently generates significant bonus income during periods of energy dislocations, as well.
Overall, Energy Transfer is a nice combination of a high-yield stock with some solid growth upside.
2. Enterprise Products Partners
While Enterprise Products Partners isn’t as direct a beneficiary of the AI data center build-out as Energy Transfer, it is still indirectly benefiting. Enterprise is one of the largest natural gas liquids (NGL) companies in the U.S., and rising gas production to support gas-fired power plants is also increasing the volume of associated NGLs that need to be processed, fractionated, stored, and transported. At the same time, Enterprise’s growth is being driven by continually increasing petrochemical and LPG (liquefied petroleum gas) export demand.
While 2026 is currently a transition year for the company following the roll-off of some high-return contracts and the narrowing of some favorable spreads, it is projecting double-digit EBITDA and distributable cash flow growth in 2027 as new projects come online and ramp up. The company is conservative in nature but plans to spend up to $4 billion on attractive growth projects this year, with $6.5 billion of projects currently under construction. It typically gets strong returns on its projects, with an average return on invested capital of 12% over the past decade.
The stock offers a 5.8% yield, and Enterprise has been increasing its distribution by about 3% annually. It has an impressive track record, having raised its payout for 28 straight years. It has a low leverage of around 3% and had a 1.9x coverage ratio based on its distributable cash flow last quarter. Meanwhile, its long-term debt is locked in at an attractive 4.7% rate with an average maturity of nearly 17 years.
If you’re looking for a relatively safe stock with an attractive yield and growing dividend, Enterprise is an ideal choice.
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Geoffrey Seiler has positions in Energy Transfer and Enterprise Products Partners. The Motley Fool recommends Enterprise Products Partners. The Motley Fool has a disclosure policy.
