5 High-Yield Midstream Stocks Booming with Surging Demand for Natural Gas
Summary
The midstream sector is experiencing a surge in natural gas demand, driven by emerging technologies such as artificial intelligence (AI), data centers, and liquid natural gas (LNG) exports. As a result, several high-yield stocks with growing distributions are poised to benefit from this trend. These stocks not only offer attractive yields but also have solid upside potential, making them ideal for long-term investments.
Energy Transfer: A High-Yielding Name with Strong Tailwinds
Energy Transfer (ET) is one of the top midstream operators in the space, boasting a 7.4% yield that’s well covered by its distributable cash flow. The company’s robust distribution and high yield are anchored by a steady business model, with approximately 90% of earnings before interest, taxes, depreciation, and amortization (EBITDA) coming from fee-based contracts. Many of these contracts are take-or-pay, ensuring a consistent revenue stream regardless of volumes.
Energy Transfer’s significant footprint in the Permian Basin positions it to benefit directly from growing power demand and LNG exports. The company is shifting into growth mode, increasing its capital expenditure (capex) from $3 billion in 2024 to $5 billion this year. This expansion is driven by strong requests related to the data center boom and a recent supply agreement with developer Cloudburst for one of the data center projects it is developing in Texas.
Furthermore, the long-stalled Lake Charles LNG project appears to be moving forward, adding another growth driver for Energy Transfer. With its high-yield name, solid balance sheet, and expanding business, Energy Transfer is an attractive option for investors seeking dependable cash flow and rising distributions.
Enterprise Products Partners: A Steady Business with a Rock-Solid Balance Sheet
Enterprise Products Partners (EPD) has hiked its payout for 26 consecutive years, demonstrating the company’s commitment to delivering steady returns to shareholders. Its robust distribution and high yield are anchored by one of the steadiest business models in the space, with approximately 85% of cash flow coming from fee-based contracts.
Many of these contracts include take-or-pay terms with inflation escalators, ensuring a consistent revenue stream for Enterprise Products Partners. The company is run conservatively but also knows when to pursue expansion opportunities. Its current growth projects total $7.6 billion, with $6 billion set to go live this year.
Enterprise Products Partners has boosted its spending on select expansion projects, taking it from $3.9 billion last year to as much as $4.5 billion this year. This increase in capex demonstrates the company’s commitment to growth and its confidence in delivering strong returns for shareholders. With a solid balance sheet, consistent cash flow, and expanding business, Enterprise Products Partners is an excellent option for investors seeking a high-yield stock with minimal risk.
Western Midstream: A Safe High-Yield Stock with Robust Growth Opportunities
Western Midstream Partners (WES) offers an attractive 9.4% yield, backed by a rock-solid balance sheet and robust cash flows. The company’s leverage ratio sits below a multiple of 3, ensuring flexibility for expansion opportunities.
Western Midstream’s cash flows are anchored by cost-of-service contracts and minimum volume commitments, providing consistent results in choppy markets. Management is targeting mid-single-digit annual increases in distributions while investing in select expansion opportunities.
One notable growth project is the Pathfinder produced-water system, which aims to clean up water generated as a by-product of drilling. This initiative could top $450 million in cost and should start ramping up in 2026. With its high-yield name, solid balance sheet, and expanding business, Western Midstream Partners is an excellent option for investors seeking dependable cash flow and rising distributions.
MPLX: A High-Yielding Name with Strong Distribution Growth
MPLX (MPLX) has been delivering some of the strongest distribution growth in the midstream space over the past few years. Despite this growth, its distribution remains covered 1.5 times by cash flow, demonstrating the company’s ability to deliver consistent returns to shareholders.
MPLX’s balance sheet is also in great shape, with leverage at just 3.3 times. This attractive profile makes it an excellent option for investors seeking a high-yield stock with minimal risk.
The company’s growth is being driven by its natural gas and NGL segment, which handles about 10% of U.S. production. With natural gas demand accelerating due to LNG exports and AI, MPLX is doubling its expansion capex to $1.7 billion in 2025. Its other initiatives include taking full ownership of the BANGL pipeline and partnering with Oneok on a joint venture to integrate their NGL export infrastructure.
Kinder Morgan: A Solid Performer with Strong Expansion Opportunities
Kinder Morgan (KMI) has the largest natural gas footprint, with roughly 40% of U.S. natural gas flowing through its system. Approximately 80% of its cash flow comes from volumetric fee-based contracts, with about 64% tied to take-or-pay contracts.
This steady base helps provide consistent results for Kinder Morgan, even in challenging markets. The company is also seeing strong expansion opportunities, with a project backlog surging to $8.8 billion last quarter, up from $3 billion just a year ago.
Over 70% of this growth is tied to power demand, targeting AI-related data centers and LNG facilities. These projects are expected to generate strong returns, with management citing 16.7% EBITDA yields on new spending. With its solid balance sheet, expanding business, and position in the right place at the right time, Kinder Morgan should continue to be a reliable performer for investors.
Conclusion
The midstream sector is poised to benefit significantly from emerging technologies such as AI, data centers, and LNG exports, driving demand for natural gas and positioning companies like Energy Transfer, Enterprise Products Partners, Western Midstream, MPLX, and Kinder Morgan for long-term growth. These high-yield stocks not only offer attractive yields but also have solid upside potential, making them ideal investments for those seeking dependable cash flow and rising distributions.
As the market continues to evolve, these companies are well-positioned to capture opportunities, driven by their strong business models, robust balance sheets, and expansion initiatives. With a comprehensive understanding of each company’s strengths and growth prospects, investors can confidently build a diversified portfolio that leverages the potential of the midstream sector for long-term success.
Total character count: 7302
