2 Ultra-High-Yield Energy Stocks to Buy Hand Over Fist and 1 to Avoid
If there's one thing you can count on in the energy sector, it is that oil and natural gas prices will be volatile. However, when energy prices head higher investors routinely seem to forget this fact, even though history says what goes up will eventually go down. Dividend investors can avoid that trap by buying midstream giants like Enterprise Products Partners (NYSE: EPD) and Enbridge (NYSE: ENB) while avoiding the variable dividends that ConocoPhillips (NYSE: COP) pays. Here's why you may want to consider Enterprise and Enbridge while avoiding ConocoPhillips.
Enterprise Products Partners is a huge midstream master limited partnership (MLP) operating in North America, boasting a roughly $50 billion market cap. Canada's Enbridge is an even bigger midstream company, weighing in at roughly $75 billion. These midstream players own massive collections of physical assets, like pipelines, storage, processing, and transportation facilities. This vital infrastructure helps to move oil and natural gas from where it is drilled to where it eventually gets processed and used. The portfolios owned by Enterprise and Enbridge would be virtually impossible to replace.
The important part here, however, is that the vast majority of the cash flow these two pipeline owners collect is from fees. That means that demand for oil and natural gas, and thus the use of their midstream infrastructure assets, has a bigger impact on cash flow than the price of what is flowing through their systems. Oil prices falling, like they have been of late, really won't have too huge an impact on the distributions that either of these two industry giants pays.
Source Fool.com
