High-Yield MLPs for Passive Income and Long-Term Growth: Strategic Buy-and-Hold Opportunities in Undervalued Midstream Energy Infrastructure

The midstream energy sector has long been a cornerstone for income-focused investors seeking stable cash flows and compounding growth. As of 2025, master limited partnerships (MLPs) and midstream corporations are trading at historically attractive valuations, presenting a compelling case for strategic buy-and-hold strategies. With forward price-to-earnings (P/E) multiples for key indices like the Alerian MLP Infrastructure Index (AMZI) and Alerian Midstream Energy Select Index (AMEI) trading below their three-year averages, the sector appears undervalued relative to its fundamentals. This discount, coupled with robust distribution growth, improving balance sheets, and long-term infrastructure tailwinds, positions midstream MLPs as a high-conviction opportunity for investors prioritizing passive income and capital appreciation.

Undervaluation and the Case for Entry

Recent market analysis underscores the sector's discounted valuation. The AMZI, a broad benchmark for midstream MLPs, trades at 8.4x 2026 estimates and 8.1x 2027 estimates, significantly below its three-year average of 8.8x. Similarly, the AMEI trades at 10.0x and 9.8x for 2026 and 2027, respectively, compared to its historical average of 9.7x. These metrics suggest that the market is underappreciating the sector's resilience and growth potential.

The undervaluation is further supported by the sector's strong operational performance. Midstream companies have improved their distribution coverage ratios, averaging 1.88x in 2023, with projections of continued improvement. This financial discipline, combined with lower leverage and stronger balance sheets, compared to pre-2020 levels, enhances their ability to sustain and grow distributions. Analysts note that the key pillars of the midstream investment case-distribution growth, free cash flow generation, and long-term demand for natural gas-remain intact.

Strategic Buy-and-Hold Opportunities

For investors seeking specific opportunities, several MLPs stand out due to their high yields, infrastructure projects, and growth trajectories:

1. Enterprise Products Partners (EPD)
   As one of the largest MLPs, EPD operates an extensive network of pipelines and storage facilities. In 2025, the company delivered its 27th consecutive year of distribution increases, supported by $6 billion in organic expansion projects. With a strong credit rating and diversified operations spanning crude oil, natural gas, and NGLs, EPD is well-positioned to benefit from U.S. LNG export growth and industrial reshoring according to market analysis.

2. MPLX
   This midstream operator has demonstrated aggressive distribution growth, with a 12.5% year-over-year increase in Q3 2025, yielding 8.03%. MPLX's strategic projects, including the Secretariat processing plant and Titan sour gas treatment expansion, are expected to drive incremental cash flows. Its focus on liquids-rich natural gas and integrated midstream services aligns with long-term demand trends.

3. Brookfield Infrastructure Partners (BIP)
   BIP offers a 17-year streak of uninterrupted distributions and targets 5% to 9% annual raises. Its diversified portfolio includes regulated assets like electrical transmission lines and natural gas pipelines, with 90% of cash flows derived from long-term contracts. This stability makes BIP a low-risk, high-yield option for income-focused investors.

For those preferring a diversified approach, ETFs like the Alerian MLP ETF (AMLP) and Global X MLP ETF (MLPA) provide exposure to a basket of high-yielding MLPs. AMLP, for instance, offers a 7.7% trailing-12-month yield and is heavily weighted in major MLPs like EPD and Plains All American Pipeline.

Long-Term Tailwinds and Policy Support

The sector's outlook is further bolstered by structural growth drivers. Natural gas demand is expected to rise due to increased LNG exports and industrial reshoring, supported by the U.S.'s role as a global hydrocarbon supplier. Additionally, the new administration's policies are anticipated to ease regulatory hurdles for new LNG export facilities, accelerating project approvals. These tailwinds, combined with MLPs' ability to reinvest free cash flow into infrastructure projects, create a virtuous cycle of growth and shareholder returns.

Conclusion

Midstream MLPs represent a rare combination of high yields, undervaluation, and long-term growth potential. For investors with a strategic, buy-and-hold mindset, the current discount in the sector offers an opportunity to lock in income-generating assets while positioning for future infrastructure-driven gains. As the energy transition unfolds and natural gas remains a critical bridge fuel, the resilience of midstream operators like EPD, MPLX, and BIP-along with diversified ETF options-makes them standout choices for a passive income portfolio.