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MLPs: Your Next Passive Income Powerhouse?
14 Dec
Summary
- S&P 500 dividend yields are near all-time lows.
- Master limited partnerships offer attractive yields.
- Energy Transfer and Enterprise Products Partners are top picks.
As the S&P 500's dividend yield hovers near historic lows, investors seeking income face increasing difficulty. Fortunately, master limited partnerships (MLPs) are emerging as lucrative alternatives, offering substantially more attractive yields. Companies like Energy Transfer and Enterprise Products Partners stand out as prime examples, capable of generating significant passive income from relatively small investments.
Energy Transfer, a leading energy midstream company, benefits from a predominantly fee-based business model, ensuring stable cash flow. This stability supports its financial strength and allows for reinvestment in expansion projects, projected to drive annual payout growth of 3% to 5%. Its robust balance sheet is currently in its strongest position historically.
Enterprise Products Partners demonstrates an even more fortified financial standing, boasting the highest bond rating in its sector. With a low leverage ratio and consistent cash flow generation, it comfortably covers its distributions, reinforcing its appeal to income-seeking investors prioritizing financial stability and reliable payouts.
