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7 High-Yield MLPs to Buy as Oil Prices Climb

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After close of a decade of uninterrupted bull market, it’s hard to find many stocks that truly qualify as cheap today. But not everything is pricey – you can still find values if you know where to look. And oil and gas master limited partnerships (MLPs), as a sector, are a screaming buy at today’s prices.

A combination of low interest rates, a shrinking pool of available shares due to buybacks and mergers, and a general lack of investable alternatives have all conspired to create one of the most expensive markets history.

To put numbers to it, the Standard & Poor’s 500-stock index’s cyclically adjusted price-to-earnings ratio (“CAPE”), which compares a 10-year average of corporate earnings to today’s share prices, clocks in at 31. That’s late 1997 levels. Meanwhile, the S&P 500’s price-to-sales ratio recently hit 2.0, putting it on par with its levels in 2000 … at the peak of the greatest bubble in market history.

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However, pipeline MLPs are looking inexpensive at the same time they’re exhibiting greater quality. After a couple difficult years in 2014 and 2015, MLPs have gotten their leverage under control and started funding their growth projects with internally generated cash flow rather than new debt.

“After several years of deleveraging and structural simplifications – which unfortunately came with distribution reductions in several cases – MLPs as an asset class are in the best financial health we’ve seen in a long time with an increased focus on per unit returns and self-funding capital expenditures,” explains John Musgrave, Co-Chief Investment Officer of Cushing Asset Management. ”And based on current price-to-DCF and EV-to-EBITDA multiples, MLPs are exceptionally cheap by the standards of the past 10 years.”

Here is a look at seven solid MLPs that offer excellent return potential, very modest risk, and in many cases, high yields.

SEE ALSO: 50 Stocks That Have Raised Dividends for 25 Straight Years

Data is as of May 7, 2018. Distribution yields are calculated by annualizing the most recent distribution and dividing by the share price. Distributions are similar to dividends, but are treated as tax-deferred returns of capital and require different paperwork come tax time. Click on ticker-symbol links in each slide for current share prices and more.

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