EPD: An Oil and Gas MLP with a Generous, Solid Payout
MoneyShow | Nov 20, 2023 17:06
In case you’re unfamiliar with it, Enterprise Products Partners is a 55-year-old oil and gas pipeline company. Its CAD dipped slightly in 2020, but in 2021, it rebounded to 2019 levels. It then exploded higher in 2022, but this year it’s expected to dip from $7.75 billion to $7.55 billion.
Last year, Enterprise Products Partners paid $4.1 billion in distributions. Since it is a master limited partnership, it pays a distribution, not a dividend. Distributions are similar to dividends but have different tax ramifications.
The $4.1 billion distribution was 53% of the company’s CAD. This year, that figure is expected to rise to 57%. That means for every dollar Enterprise Products Partners has in cash flow, it is projected to pay out $0.57 in distributions. That’s a low number, and it means the company can easily afford its distribution.
The other thing Enterprise Products Partners has going for it is its distribution payment history. It has raised its distribution in each of the past 25 years and just raised the payout to $0.50 per share in August. The stock recently yielded a juicy 7.2%.
The strong cash flow and quarter-century-long track record of annual distribution raises tell me the distribution is safe. The only mark against the company is the expectation that CAD will decline this year. However, even if cash flow does come in slightly lower than where it was last year, it will still be more than enough to cover the distribution – and a raise in the near future.
In fact, I like the stock so much that I recommended it in 2020 in The Oxford Income Letter. We’re sitting on a 143% gain as I write, and readers who bought it when I first recommended it are enjoying a gigantic (and safe) 13.4% yield.
Recommended Action: Buy EPD.
Original Article
Get The App
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.