These 2 Ultra-High-Yielding Dividend Stocks Just Gave Their Investors Another Raise

Energy Transfer (ET) and MPLX, two master limited partnerships, recently announced significant distribution increases, with ET raising its payout by over 3% in the past year to yield 7.8%, and MPLX hiking its distribution by 12.5% to yield 8.5%. Both companies exhibit strong financial profiles, evidenced by ET's substantial H1 cash generation and MPLX's robust distribution coverage and low leverage. Extensive growth capital investments, including ET's $5.3 billion Desert Southwest Expansion and MPLX's $2.4 billion Northwind Midstream acquisition, are expected to fuel continued earnings and distribution growth, positioning these MLPs for compelling total return potential.

Analysis

Energy Transfer (ET) and MPLX (MPLX), both master limited partnerships, have recently announced significant distribution increases, underscoring their robust financial positions and growth trajectories. ET raised its quarterly payout to $0.3325 per unit, resulting in a 7.8% forward yield, while MPLX boosted its distribution by 12.5% to $1.0765 per unit, pushing its yield to 8.5%. Both companies demonstrate strong distribution coverage, with ET generating $4.3 billion in cash in H1, comfortably covering its $2.3 billion distribution, and MPLX achieving a 1.6x coverage ratio in Q2 with a low 3.1x leverage.

These distribution increases are supported by substantial capital investments aimed at future growth. ET plans $5 billion in growth capital this year, including the $5.3 billion Desert Southwest Expansion Project slated for completion by 2029. Similarly, MPLX is deploying over $5 billion into growth opportunities, notably the $2.4 billion Northwind Midstream acquisition and various organic expansions, with projects extending through the end of the decade. These initiatives are expected to generate significant incremental cash flow and drive continued earnings expansion.

The combination of high, consistently growing distributions and visible long-term growth prospects positions both MLPs for robust total return potential. ET targets 3-5% annual distribution increases, while MPLX anticipates mid-single-digit annual earnings growth to sustain its payouts. Investors should, however, account for the tax complexities associated with the Schedule K-1 forms inherent to MLP investments.

Key Decisions for Investors

• Evaluate ET and MPLX for their compelling combination of high, growing distributions and visible long-term growth projects, particularly given their strong financial coverage and low leverage.
• Consider the long-term total return potential from both distribution increases and potential unit price appreciation, supported by their ongoing capital investments and project pipelines.
• Factor in the tax implications of Schedule K-1 forms when assessing these MLPs for portfolio inclusion, as they can add administrative complexity for investors.