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Bet on 3 Midstream Stocks With Solid Distribution Yields

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The relaxation of social-distancing measures is brightening the outlook for fuel demand. Hence, investors may choose to reallocate money to midstream energy stocks, offering impressive distribution yield.

Economy is Recovering

COVID-19 restrictions are being lifted gradually with a significant proportion of the American population being fully vaccinated. Importantly, millions of people in the United States celebrated the Memorial Day weekend without masks, marking the first maskless holiday celebration in more than a year. Furthermore, fresh data from the Commerce Department suggests that consumer spending, which is the biggest determinant of the U.S. economic health, continues to grow.

Thus, there are signs of improving fuel demand with oil prices rapidly gaining strength as compared to the pandemic-hit April last year, when oil was in the negative territory. The price of natural gas will also continue to improve since there are possibilities of higher domestic consumption of gas in the commercial and industrial sectors as more people will return to work.

Midstream Stocks in the Spotlight

With fuel demand recovering, midstream energy stocks are now on investors’ radar. This is because, to cash in on higher commodity demand from refiners and end markets, crude and natural gas explorers are returning to shale plays with additional drilling rigs, driving production volumes.

Higher production will possibly lead to increased oil and gas midstream asset demand. Thus, midstream business is gathering steam, thereby securing more returns for unit holder.

3 Stocks to Buy Yielding At Least 5% Distribution

We have zeroed down on three midstream energy stocks that are yielding higher distributions than the broader energy sector and the S&P 500. Notably, all these stocks have been rewarding higher distribution yields than the composite stocks belonging to the sector consistently over the past two years. Moreover, all the three stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Energy Transfer LP (ET - Free Report) is a leading midstream player in the United States comprising a vast network of transportation and storage assets for natural gas, crude and refined products. The stock has a distribution yield of 6.2% versus the broader energy sector’s yield of 3.9% and the S&P 500’s yield of 1.3%.

Enable Midstream (ENBL - Free Report) , with headquarters in Dallas, TX, is a master limited partnership. It is a leading operator of natural gas and crude oil infrastructure assets. The stock has a distribution yield of 7.8%.

Hess Midstream LP (HESM - Free Report) is a growth-oriented firm, with diverse network of midstream properties that provide services to Hess Corporation (HES - Free Report) – a leading shale oil and gas producer. The stock has a distribution yield of 7.1%.

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