Looking For Lucrative Passive Income Streams? These 3 Dividend Stocks Yield as Much as 9% (And Just Raised Their Payments).

Three midstream MLPs — Delek Logistics Partners, Hess Midstream and Plains All American Pipeline — reported distribution increases and strong cash-flow positions that support high yields and further payout growth. Delek raised its quarterly rate to $1.125/unit ($4.50 annualized), a 0.4% quarter-over-quarter increase and its 52nd consecutive quarterly raise, covering distributions by ~1.3x and investing in gas processing and sour-gas projects. Hess announced $0.7641/share (a 1.2% quarterly rise), yields 8.2%, has 100% fee-based minimum-volume contracts through 2028, expects at least 5% annual dividend growth through 2028 and forecasts about $1bn of excess FCF over that period. Plains lifted distributions to $0.4175/unit ($1.67 annualized), a 10% increase (21% CAGR over four years), is selling a $3.8bn Canadian NGL business and deployed $2.9bn to acquire the EPIC/Cactus III pipeline, recycling capital into steadier oil-pipeline cash flows.

Analysis

Market structure: HESM (fee-based, MV contracts to 2028) is the primary beneficiary — it converts midstream cashflows into quasi-fixed income (8.2% yield today) while PAA benefits from de-risking via the $3.8bn NGL sale and redeployment into oil pipes. DKL retains high headline yield (9%) but weaker coverage (~1.3x) and K-1 tax frictions make it a second-tier income pick. Reduced NGL exposure across the group signals a sector tilt from commodity-volatility beta toward contract-driven cashflow, compressing idiosyncratic volatility but increasing sensitivity to rate moves.

Risk assessment: Tail risks include regulatory shocks (FERC/SEC methane/carbon rules), a counterparty production shock (10–20% volume decline from a top producer), or transaction failure on PAA’s sale — any of which could force >30% drawdowns in units. Timewise, immediate pricing already reflects declared raises; watch the next 6–12 months for PAA sale close and Libby capex execution; long-term visibility centers on HESM through 2028. Hidden dependency: top-customer concentration (Chevron/large E&Ps) and leverage at the GP/LP level can transmit upstream shocks quickly.

Trade implications: Tactical long HESM (2–3% portfolio) for steady 5%+ annual dividend growth to 2028; cap DKL exposure to ≤1% until coverage >1.5x or buy via deep OTM puts. Use covered calls to harvest income (sell 3–6 month calls 8–12% OTM) and consider a long PAA tranche (1–2%) only post-close of the NGL sale. Pair trade: long HESM / short DKL to capture spread; close on spread compression of 200–300bps or at 12 months.

Contrarian angles: Market is underweight the value of HESM’s contract floor — it may re-rate if rates stabilize and investors pay for duration-like cashflows; conversely yield-chasing could mask capex overruns at DKL/PAA leading to surprise cuts. Historical parallel: MLP repricing 2018–20 shows this group can de-rate rapidly if rate or commodity regimes change; don’t assume streaks continue without covenant and capex confirmation.

Key Decisions for Investors

• Establish a 2–3% portfolio long position in HESM (buy at market) and add on >5% pullback; sell 1–2 covered calls (3–6 month expiries, 8–12% OTM) to boost income; target total return 25–35% to 2028 (distributions + modest multiple expansion).
• Cap direct exposure to DKL at ≤1% of portfolio until distribution coverage improves to ≥1.5x; alternatively, sell 6-month cash-secured puts with strike ~7% below current price to collect premium and only acquire on deeper weakness or improved coverage metrics.
• Take a conditional 1–2% tactical position in PAA after confirmation of the $3.8bn Canadian NGL sale close (expected within 6–12 months); if sale closes, buy 9–12 month 15% OTM calls (small notional) for leveraged upside, or sell 6-month puts 5% OTM to improve entry yield.
• Implement a relative-value pair: go long HESM and short DKL equal notional (net market exposure ~2% of portfolio) to capture safety spread; unwind if yield spread compresses by 200–300 basis points or after 12 months.