Three Overlooked High-Yield Pipeline Stocks for Income
An analysis identifies three crude-oil-focused pipeline stocks offering high yields, as investor attention shifts to natural gas infrastructure for AI data
Investors focused on natural gas pipelines for AI data centers may be missing high-yield opportunities in crude oil logistics. Three pipeline stocks with yields between 7.4% and 8% are being overlooked despite significant income potential.
Most market attention is on energy infrastructure for artificial intelligence, fueling demand for natural gas pipelines and power plants. This focus has left crude-oil-focused pipeline companies trading at lower valuations. The source argues this comes as the oil market faces its biggest supply disruption in decades due to Middle East conflict.
MPLX: A Diversified MLP with Growth Plans
MPLX, a master limited partnership formed by Marathon Petroleum, operates crude oil and petroleum products logistics assets. These assets generated nearly $2.3 billion in adjusted EBITDA in the first half of this year, about 65% of its total. Its natural gas and NGL services platform accounts for the remaining 35%.
The MLP's focus on crude oil leads to a lower valuation and a distribution yield currently around 7.4%. While most current earnings come from oil logistics, natural gas is its biggest growth driver. MPLX is investing 90% of its organic growth capital on gas and NGL projects, including new processing plants and pipelines. It has increased its payout by 12.5% in each of the past two years and expects to continue that growth rate through 2027.
Hess Midstream: Focused on the Williston Basin
Hess Midstream owns oil, gas, and water-handling assets in North Dakota's Williston Basin. Its assets support parent company Chevron, which acquired Hess last year, and third-party customers. The pipeline company currently yields 7.8%.
Hess Midstream is targeting annual dividend growth of around 5% through 2028 and has delivered growth above that target since 2022. The company expects minimal future capital investments to support contracted customer volume growth. This positions it to generate strong, growing cash flows with significant visibility for its dividend plan. Its financial strength also allows for additional shareholder returns through share repurchases.
Delek Logistics: A Record of Consistent Payouts
Delek Logistics Partners, formed by refiner Delek U.S. Holdings, has the highest yield in this group at 8%. Its operations span crude oil, refined products, natural gas, and water. The MLP has diversified, with about 70% of its EBITDA now from third-party customers, up from 41% in 2023.
A key feature is its consistent distribution growth. Delek Logistics has increased its distribution for 54 consecutive quarters, or more than 13 straight years. Growth has come from organic expansions and acquisitions. It is nearing completion of an integrated sour gas solution at its Libby Gas Complex to support customer demand. While its financial position is weaker than some peers, the source states it is solid enough to fund operational expansions.
| Company | Ticker | Current Yield | Key Growth Focus | Distribution Growth Target/Record |
|---|---|---|---|---|
| MPLX | NYSE: MPLX | ~7.4% | Natural gas & NGL infrastructure | 12.5% annual increase expected through 2027 |
| Hess Midstream | NYSE: HESM | 7.8% | Williston Basin volume support | ~5% annual growth target through 2028 |
| Delek Logistics Partners | NYSE: DKL | 8% | Diversification & sour gas projects | 54 consecutive quarters of increases |
The report concludes these three companies are interesting options for investors seeking high-yield dividend stocks that are under the radar. The trade-off for their higher yields and lower valuations is that they might not grow as fast as more gas-focused peers in the pipeline sector. Matt DiLallo, the author cited in the disclosure, has positions in Chevron.
