For a relatively safe value play, MLPs and midstream companies offer low volatility and attractive dividends. Warren Buffet has recently increased Berkshire’s stake in Occidental Petroleum, so if you’re feeling like you’ve missed the boom in oil & gas, you’re in luck.

While oil exploration companies are trading near all time highs, midstream companies are still at relatively decent valuations. In addition, they offer attractive dividends yields. Two stocks I have alternately sold puts on or owned outright with good results are Energy Transfer (ET) and Enterprise Products (EPD), both of which have current dividend yields of about 7%.

In fact, any time either of these two companies hit a floor, I dive back in and wait for the inevitable bounce in price. (Usually using a near-the-money put option.)

The options play

EPD and ET are solid value stocks, and as such, have low implied volatility. That is to say, the option premium you collect won’t be as high as a stock with an implied volatility of say, 40%. (EPD’s implied volatility is about 27%.)

So while EPD and ET are not exactly ideal targets for selling options like puts or covered calls, you can still use these strategies to easily crank out a return somewhere in the mid-teens. (I was able to generate an annualized ROI of 15% by holding EPD and selling covered calls.)

In the current environment, and with rising inflation, owning a solid value stock that pays a healthy dividend may not provide the best returns, but in the worst case, is a safe place to park some capital and generate cash while waiting for more lucrative plays. EPD is financially healthy, currently trading at a little over twice its book value – not a bad valuation considering its attractive dividend yield.

Besides, who can turn up their nose at a 15% return?