5 Top-Ranked MLPs For Investors Playing A 2018 Rebound

Looking ahead, EIA forecasts total U.S. crude oil production to average 9.2 million barrels a day in 2017, rising to 10.0 million barrels per day next year - the most since the 1970s. The healthy production trajectory is expected to drive midstream volumes and cash flows. Cash flows should improve further with a number of high capital expenditure projects starting to come online and generate revenues.

The Trump Factor: Making good on his campaign promises to rev up infrastructure spending, President Trump signed executive orders to smooth the way for TransCanada Corp.’s (TRP - Free Report) Keystone XL Pipeline and Energy Transfer Partners L.P.’s (ETP - Free Report) Dakota Access Pipeline just a few days into his new Administration. With the U.S. government indicating that it will expedite approvals of future developments as part of new energy infrastructure projects.

Tax Reform: Expectations that the Trump administration’s proposed tax and regulatory reforms will allow the publicly traded partnerships to retain their current status and take the pass-through business deduction have given investors further reasons to put their money in MLPs. Per an eleventh-hour amendment proposed by Senator John Cornyn of Texas, unitholders will be eligible to deduct 23% of the attributable income, prior to being taxed. This will effectively mean a lower tax rate for MLPs.

Attractive Valuations: The midstream sector is currently trading at their cheapest valuations in years with the high-yield securities appearing inexpensive from almost every metrics - from distribution growth to EV/EBITDA. Together with robust fundaments, the discount pricing seems to be the perfect excuse for investors to indulge in some bargain buying.

Our Choices

The strong fundamentals do not necessarily indicate that all energy MLPs would be wise picks. Moreover, with a wide range of partnerships thronging the investment space, it is by no means an easy task for investors to arrive at stocks that have the potential to deliver attractive returns.

While it is impossible to be sure about such outperformers, this is where the Zacks Rank, which justifies a company’s strong fundamentals, can come in really handy. In particular, we have shortlisted 5 midstream operators having a Zacks Rank of #1 (Strong Buy) or #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Disclosure: Zacks.com contains statements and statistics that have been obtained from sources believed to be reliable but are not guaranteed as to accuracy or completeness. References to any ...

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