Can I Buy High-Yield Enterprise Products Partners Stock Late?

Enterprise Products Partners (NYSE: EPD) shares have increased 10% in 2024, making investors worry if they missed out on this high-yield midstream powerhouse. There are still several reasons to acquire the MLP and its high 7% dividend yield. What you need to know.

Enterprise transports oil, not drills. Understanding that Enterprise Products Partners is a midstream company is crucial. Key energy infrastructure comprises pipelines, storage, transportation, and processing facilities. Midstream companies link upstream (drilling) and downstream (refining and chemicals) and the world.  

The midstream sector is mostly a toll-taker. Thus, Enterprise receives compensation for its irreplaceable assets. Energy demand, which remains strong independent of oil, natural gas, and the commodities they transform into, is more crucial to the MLP's top and bottom lines than commodity prices.  

Midstream dynamics generate stable cash flows for Enterprise's 7% distribution yield. That is lower than when the unit price was 10% cheaper, but it is still higher than an S&P 500 index fund (1.3%) or the average energy stock (2.9%), using the Vanguard Energy Index ETF as an industry proxy. Most importantly, Enterprise remains an appealing income stock following a solid price climb.  

Enterprise's reach should expand. However, Enterprise's distribution yield is less appealing than when the unit price was lower. Despite these slightly lower yields, there are still good reasons to get in. It has one of the strongest midstream balance sheets. The MLP has an investment-grade rating and a debt-to-EBITDA ratio of 3.1 times, lower than any of its nearest counterparts. That suggests its finances are stable.  

Distribution is next. Enterprise has increased payments annually for 25 years, demonstrating its commitment to unitholders. An impressive 1.7 times, the MLP's distributable cash flow covered the payout in 2023. Many things must go wrong before the distribution is cut. The distribution is likely to rise with time. Regular annual increases are the first commitment. Enterprise contracts include price increases.  

As the MLP completes its $6.8 billion capital investment projects, cash flows will be generated. That investment is set until 2026, but history implies more projects will appear as current ones finish. Enterprise is substantial and financially stable enough to consolidate industries.  

You acquire Enterprise for yield. This is a monotonous company, and the yield will likely be your main return. The MLP's point is that: A yield-focused investment. Even after the recent 10% price increase, income investors should still buy Enterprise Products Partners because its yield is still attractive, it is financially strong, and its capital investment projects will grow slowly.  

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