A 9.04% forward yield places this midstream energy partnership in the top 20% of all dividend payers, and well above the 7.5% average for its energy partnership peers. That income rests on fee-based contracts, many with minimum volume commitments, which shield most of its cash flow from swings in oil and gas prices. The units also trade 18% below their 52-week high, so new buyers get more income for each dollar invested.
The partnership gathers, processes and moves natural gas, crude oil and the salty water that comes up alongside oil from shale wells in Texas, New Mexico, Colorado and Wyoming. Its customers are oil and gas producers, led by a large anchor customer that also controls the partnership’s general partner. Recent acquisitions made it one of the largest water handlers in the most active drilling region in the US. Third-quarter results showed record gas and water volumes, and management expects full-year earnings to beat the middle of a guidance range it had already raised.
The concerns sit with margins and spending. Per-unit gas and crude margins slipped from the prior quarter, the Colorado business keeps shrinking, and cash flow after distributions turned negative this quarter. Management will decide on any distribution increase in February.
We increased our position in the Best High Dividend Stocks Portfolio because the yield is high and the volume growth behind it is real. With several projects due by early 2027, the payout has firmer support than the recent share price suggests.
