Top High-Yield Midstream Stocks to Buy Now

In the ever-evolving landscape of the energy sector, midstream stocks have emerged as a beacon of stability and growth. As we navigate through March 2025, the market presents a unique opportunity for investors to capitalize on high-yield midstream stocks. These stocks not only offer attractive dividends but also provide a defensive posture against market volatility and inflation. Let's delve into the key factors that make high-yield midstream stocks a smart investment choice and highlight the top picks for investors with a $100 budget.

Why High-Yield Midstream Stocks Are a Smart Investment

1. Attractive Yields: Midstream companies are known for their high dividend yields. For instance, Torm (NASDAQ:TRMD) boasts an annual dividend yield of 33.31%, significantly higher than the industry average of 5.7%. This makes them an attractive option for income-seeking investors.

2. Stable Cash Flows: Midstream companies benefit from stable and predictable cash flows due to their fee-based business models. This stability is crucial in a volatile market environment. For example, Mplx (NYSE:MPLX) has a Due Diligence Score of 54, which is 20 points higher than the industry average, indicating strong fundamentals and reliable cash flows.

3. Growth Opportunities: The midstream sector is poised for growth due to increasing energy production and constrained pipelines. This is evident in the performance of stocks like Excelerate Energy (NYSE:EE), which has seen its stock return 120.88% over the past year, overperforming other oil & gas midstream stocks by 95 percentage points.

4. Defensive Posture: Midstream companies have historically outperformed during periods of high inflation and market volatility. This defensive posture is beneficial in the current economic climate, where there is uncertainty surrounding interest-rate cuts and global energy policies.

5. Lower Leverage: Midstream companies have reduced their leverage, making them financially stronger. For example, investment-grade midstream sector leverage (debt to EBITDA) was approximately 3.8x at the end of 2023, which is lower than the 5-year average of 4.2x.

Top High-Yield Midstream Stocks to Buy Now

1. Excelerate Energy (NYSE:EE)
- Zen Rating: A
- Component Grades: Value: C, Growth: B, Momentum: A, Sentiment: B, Safety: C, Financials: B, AI: C
- Due Diligence Score: 39
- Stock Return (Past Year): 120.88%
- 1-Year Price Target: $31.17 (1.59% upside from current price of $30.68)
- Analyst Recommendation: Hold

Excelerate Energy stands out as the top midstream stock with a Zen Rating of A. Its strong momentum and sentiment grades, coupled with a robust stock return, make it a compelling choice for investors.

2. Mplx (NYSE:MPLX)
- Zen Rating: B
- Component Grades: Value: C, Growth: C, Momentum: A, Sentiment: B, Safety: A, Financials: B, AI: B
- Due Diligence Score: 54
- Stock Return (Past Year): 39.63%
- 1-Year Price Target: $53.71 (0.36% downside from current price of $53.91)
- Analyst Recommendation: Strong Buy

Mplx offers a strong defensive posture with its high safety grade and reliable cash flows. Its strong momentum and sentiment grades, along with a consensus Strong Buy recommendation, make it a solid investment option.

3. Hess Midstream (NYSE:HESM)
- Zen Rating: B
- Component Grades: Value: B, Growth: C, Momentum: C, Sentiment: D, Safety: B, Financials: B, AI: C
- Due Diligence Score: 39
- Stock Return (Past Year): 22.81%
- 1-Year Price Target: $44.67 (7.04% upside from current price of $41.73)
- Analyst Recommendation: Buy

Hess Midstream provides a good balance of value and safety, making it a reliable choice for investors seeking stability and growth.

Dividend Yields and Sustainability

The dividend yields of the top midstream stocks significantly exceed the industry average. Torm (NASDAQ:TRMD) and Dorian Lpg (NYSE:LPG) offer annual dividend yields of 33.31% and 18.17%, respectively, which are much higher than the industry average of 5.7%. However, the sustainability of these yields varies. Torm's dividend appears to be more sustainable due to its lower payout ratio, while Dorian Lpg's high payout ratio suggests potential long-term sustainability issues.

Conclusion

In conclusion, high-yield midstream stocks present a compelling investment opportunity in the current market environment. With attractive yields, stable cash flows, growth opportunities, and a defensive posture, these stocks offer a unique combination of income and stability. For investors with a $100 budget, Excelerate Energy, Mplx, and Hess Midstream are top picks that provide a balanced mix of growth and dividend income.