A master limited partnership (MLP) is a for-profit firm that is publicly traded as a limited partnership. This business structure is similar to that of a limited partnership, except the shares are exchanged on stock markets. Simply put, MLPs provide tax advantages similar to limited partnerships and provide liquidity similar to publicly listed securities.

MLPs are low-risk investments since they help generate steady income by consistent cash distributions to investors. The stock market has been under immense pressure lately due to Federal Reserve’s interest rate hikes to control the multi-decade high inflation.

The Fed's most recent GDP forecast suggests that the U.S. may already be in a technical recession, which is defined as two consecutive quarters of negative GDP growth. However, the Energy Select Sector SPDR ETF (XLE) gained 30.8% year-to-date despite the broader market recording its worst half in more than 50 years.

Given this backdrop, we think shares of fundamentally sound MLPs Suburban Propane Partners, L.P. (SPH), Höegh LNG Partners L.P. (HMLP), and Hess Midstream L.P. (HESM) could be great additions to one’s watchlist.

Suburban Propane Partners, L.P. (SPH)

SPH is involved in the retail marketing and distribution of propane, fuel oil, and refined fuels. The company has four operating segments: Propane, Fuel Oil and Refined Fuels, Natural Gas and Electricity, and All Other.

Last month, SPH partnered with Veterans Bridge Home (VBH), a Charlotte-based nonprofit that connects Veterans and their families in any state of transition to the community. Along with its network of partners, VBH helps Veterans navigate employment, create social connections, and settle their families.

For the second quarter ending March 26, 2022, SPH’s revenue increased 7.4% year-over-year to $516.82 million. Its operating income grew 30.4% from its prior-year quarter to $191.96 million, while Its net income grew 37.6% from its year-ago value to $175.10 million. The company’s EPS improved 35.6% from its prior-year quarter to $2.74.

The consensus EPS estimate of $1.03 represents a 202.9% improvement year-over-year for the first quarter ending December 2022. The stock has gained 5.9% year-to-date.

SPH's POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

The stock also has an A grade for Momentum and a B for Sentiment and Quality. Within the D-rated MLPs - Gas industry, it is ranked #1 of 3 stocks.

To see additional POWR Ratings for Value, Stability, and Growth for SPH, click here.

Höegh LNG Partners LP (HMLP)          

HMLP emphasizes owning, operating, and acquiring floating storage and regasification units (FSRUs), liquefied natural gas (LNG) carriers, and other LNG infrastructure assets under long-term charters.

In May, HMLP entered into a definitive merger agreement with Höegh LNG Holdings Ltd. (LNG), under which HMLP will acquire, for cash, all of the outstanding publicly held common units of the Partnership for $9.25 per common unit for a total purchase price of approximately $167.6 million.

In April, HMLP’s board of directors announced a quarterly cash distribution for the quarter ended March 31, 2022, of $0.01 per unit for the common units. It was paid on May 13, 2022, to all common unitholders of record as of the close of the business on May 2, 2022.

During the first quarter ending March 31, 2022, HMLP’s total revenue increased 1.5% year-over-year to $35.31 million. Its operating income came in at $28.49 million, while its net income amounted to $20.16 million over the period. The company’s EPS stood at $0.49 over the period.

The consensus EPS estimate of $0.42 for the third quarter ending September 2022 represents a 3.8% year-over-year growth. Analysts expect revenue to increase 1.4% year-over-year to $35.19 million for the second quarter ending June 2022. The company’s shares have surged 108.3% year-to-date.

HMLP's strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The stock also has an A grade for Momentum and a B for Quality and Sentiment. Within the same industry, it is ranked #2.

In total, we rate HMLP on eight different levels. Beyond what we've stated above, we have also given HMLP grades for Stability, Value, and Growth. Get all the HMLP ratings here.

Hess Midstream L.P. (HESM)

Headquartered in Houston, Texas, HESM owns, develops, operates, and acquires midstream assets. The company has three operational segments: Gathering; Processing and Storage; and Terminaling and Exporting.

For the first quarter ended March 31, 2022, HESM’s total revenues increased 8.2% year-over-year to $312.40 million. Its income from operations improved 7.1% from its prior-year quarter to $195.5 million, while its net income amounted to $16.90 million. Its EPS improved 14% from its prior-year quarter to $0.49.

Analysts expect HESM's revenue to increase 4.6% year-over-year to $308.42 million for the second quarter ending June 2022. The company's EPS is expected to grow 19.7% year-over-year to $0.53 in the second quarter ending June 2022. The stock has gained 11.5% over the past year.

It is no surprise that HESM has an overall B rating, equating to Buy in our POWR Ratings system. HESM has an A grade for Momentum and a B for Value and Quality. In the MLPs - Gas industry, it is ranked #3.

Click here to see the additional POWR Ratings for HESM (Growth, Stability, and Sentiment).

SPH shares were trading at $15.51 per share on Monday afternoon, up $0.25 (+1.64%). Year-to-date, SPH has gained 10.32%, versus a -19.14% rise in the benchmark S&P 500 index during the same period.

Spandan's is a financial journalist and investment analyst focused on the stock market. With her ability to interpret financial data, she aims to help investors evaluate the fundamentals of a company before investing.

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