Ditch Energy Transfer? These High-Yield Energy Stocks Are Smarter Plays for Your $100 Today

Wall Street's pumping oil again—but not where you'd expect. While Energy Transfer LP (ET) hogged the spotlight, sharper investors are flipping the script. Here's where to park a Benjamin for serious juice.

Yield hunters, assemble

Midstream's messy. Renewables are political footballs. But three under-the-radar plays are printing cash flows like a Fed balance sheet. We're talking double-digit yields without the baggage of fossil-fuel pariah status.

The stealth energy income revolution

One LNG exporter's quietly locking in 20-year contracts at rates that'd make OPEC blush. A solar operator's stacking tax credits like Tetris blocks. And don't sleep on the uranium middleman—that's right, the stuff that powers reactors—trading at a P/E lower than your ex's standards.

Pro tip: These aren't your granddad's oil dividends. The smart money's already rotating into energy's new guard—where the yields are fatter and the ESG headaches thinner. Just don't tell the meme-stock crowd; they're still busy YOLO-ing into bankrupt shale drillers.

Image source: Getty Images.

A well-oiled, income-producing machine

Plains All American Pipeline owns and operates midstream energy infrastructure focused on crude oil and natural gas liquids (NGLs). About 8 million barrels of oil and NGLs FLOW through its system of pipelines, storage terminals, and other assets each day.

The MLP primarily collects a fixed fee as those volumes pass through its network (85% of its earnings after closing the pending sale of its Canadian NGL business). The company has a stable cash Flow profile similar to Energy Transfer, with only 15% of its future earnings having commodity price exposure compared to about 10% for its larger rival.

The oil pipeline company expects to produce enough cash to cover its high-yielding distribution by 1.75 times this year. That's a comfortable level. (It's currently above its 1.6x target.) It's not too far from Energy Transfer's current coverage level (nearly 1.9x through the first half of this year).

Plains All American Pipeline also backs its payout with a strong balance sheet. The oil pipeline company exited the second quarter with a 3.3x leverage ratio, putting it toward the low end of its 3.25x to 3.75x target range. That's well below Energy Transfer's level, which is currently NEAR the low end of its 4.0x to 4.5x target range. Energy Transfer's larger, more diversified business model allows it to have a higher leverage ratio. Plains' already strong financial profile will grow only stronger once it closes its Canadian NGL sale.

The company's strong financial profile allows it to invest in expanding its operations. Plains invests in organic expansion projects and makes small bolt-on acquisitions. (It bought another 20% interest in the BridgeTex Pipeline Company in the second quarter.) These growth investments should enable the company to continue increasing its distribution.

Plains All American expects to increase its payout by around 10% annually until it reaches its targeted 1.6x coverage level, and then it aims to grow its payment at the same rate as its cash flow. That's likely a faster pace than Energy Transfer, which targets annual distribution growth of 3% to 5%.

Steady baseline income growth with upside potential

Western Midstream primarily focuses on providing natural gas, crude oil, and produced water services to oil and gas companies in the Delaware, DJ, and Powder River Basins. Fee-based contracts supply much of its earnings. That enables the MLP to produce predictable cash flow to support its high-yielding dividend.

The energy midstream company expects to generate $1.3 billion to $1.5 billion of free cash flow this year. That's enough money to cover its lucrative distribution and the capital expenses to maintain and grow its operations, with room to spare. The MLP also has a sub-3.0x leverage ratio, giving it additional financial flexibility.

Western Midstream plans to use some of its excess financial capacity to buyin a $1.5 billion cash and stock deal. That deal will enhance its operations and boost its free cash flow next year. Meanwhile, it has visible growth coming down the pipeline in 2027 from its recently approved North Loving II gas processing plant and Pathfinder Pipeline projects.

The company's growth investments should support continued distribution increases. Western Midstream aims to deliver low- to mid-single-digit annual growth supported by the steady expansion of its Core business. Additionally, it sees the potential for incremental distribution growth fueled by major expansion projects and acquisitions.

Better income options

Energy Transfer is an excellent MLP to buy for passive income. However, Plains All American and Western Midstream currently offer higher-yielding payouts. Further, those MLPs (which, like Energy Transfer, send a Schedule K-1 Federal Tax FORM each year) could deliver higher income growth rates in the future. That makes them smarter investments for those seeking to maximize the income produced from every $100 they invest.