8 Mar

Analyzing Top Midstream Companies’ Yields

WRITTEN BY Rekha Khandelwal, CFA

Midstream yields

So far, the midstream indicators discussed in this series look positive for the midstream sector. Now, we’ll discuss the attractive yields that these companies offer. Energy Transfer (ET) is trading at a yield of ~8.2%. MPLX (MPLX) offers a yield of 7.9%, while Magellan Midstream Partners (MMP) is trading at a yield of 6.6%. Enterprise Products Partners (EPD) and Williams Companies (WMB) offer yields of 6.2% and 5.5%, respectively.

Analyzing Top Midstream Companies’ Yields

As the above graph shows, the top midstream companies’ yields have risen significantly over the last five years. The spread over the US ten-year Treasury yield has also risen.

Energy Transfer is trading at a spread of ~550 basis points over the US ten-year Treasury yield. Williams Companies offers a spread of ~280 basis points. Enterprise Products, Magellan Midstream, and MPLX offer a spread that’s between Energy Transfer and Williams Companies.

Higher risks?

High volatility in stock prices due to volatile commodity prices contributed to the increased risk perception for midstream stocks over the last few years. With the number of energy sector MLPs shrinking—due either to conversion to C corporations or consolidation—investors are looking at sector players based on their assets and performance instead of just the corporate structure.

The fund flows into top MLP ETFs show the dramatically changed picture for the MLP sector, which we’ll discuss in the next part.

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Energy Transfer is trading at a yield of ~8.2%. MPLX offers a yield of 7.9%, while Magellan Midstream Partners is trading at a yield of 6.6%.

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Energy Transfer is trading at a yield of ~8.2%. MPLX offers a yield of 7.9%, while Magellan Midstream Partners is trading at a yield of 6.6%.

Energy Transfer is trading at a yield of ~8.2%. MPLX offers a yield of 7.9%, while Magellan Midstream Partners is trading at a yield of 6.6%.

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