These high-yielding energy plays could be a ‘win/win,’ Bank of America says
Sharp swings in oil prices are sending stocks on a roller-coaster ride, but investors may be able to pocket some portfolio income from a corner of the energy sector, Bank of America found. After a short breather, oil prices resumed their climb , with Brent crude futures , the global benchmark, rising more than 3% to top $103 per barrel on Tuesday. Traders began to question whether President Donald Trump would be able to gather sufficient support from allies to escort oil tankers through the Strait of Hormuz. Iran also launched a fusillade against the United Arab Emirates’ energy infrastructure , raising fears over the availability of oil supplies. The latest developments out of the Middle East lifted the energy sector, but Bank of America recently zeroed in on a related play that can generate solid portfolio income. “Own [master limited partnerships] for a true ‘win/win’ scenario positioned for both bull and bear oil cases,” wrote Jared Woodard, the firm’s investment and ETF strategist, in a report last week. He noted that these so-called MLPs “offer 3% yields, while valuations are below historical averages.” He highlighted the play as a way to help diversify beyond the balanced portfolio with a 60% allocation toward stocks and 40% in bonds. Master limited partnerships In the world of energy, certain pipeline companies fall under the category of master limited partnerships – and that’s why they can offer attractive dividend yields. Though the partnerships aren’t subject to federal income taxes, the investors – known as limited partners – are responsible for taxes on distributed income. This is different from the tax treatment of C-corporations: In that case, the business faces corporate income taxes, and the shareholders pay taxes on dividends. There is a tradeoff for that additional income: The partnership sends a Schedule K-1 to its investors every spring, breaking down the income received. Partners need this report in order to file their tax returns – and if the Schedule K-1 shows up late, the investors will likely need to go on extension to file their tax returns. Dividend yielding plays In his report, Woodard called out the Tortoise North American Pipeline Fund (TPYP) , which offers a dividend yield of 3.3%. He also pointed out the Global X MLP & Energy Infrastructure ETF (MLPX) , which has a dividend yield of 4.1%. Both are up about 20% in 2026. Another name in the mix – this time a play on natural gas – is Energy Transfer , said Adam Baker, equity analyst at Morningstar. Energy Transfer is up 14% in 2026, and it has a current dividend yield of 7.1%. Energy Transfer has caught investors’ attention as a way to get in on powering data centers, as the company penned agreements with Oracle and CloudBurst Data Centers last year. However, a new catalyst may be developing, Baker said. Consider that Qatar has shut down its liquified natural gas production . “With the Qatar LNG shutdown, there are a lot of whispers about another leg to the LNG story in the U.S.,” the analyst said. “The U.S. has all of this associated infrastructure and a ton of natural gas to take away.” He added that this means the narrative around a glut of natural gas has been postponed to at least 2027. – CNBC’s Michael Bloom contributed reporting.
<
