Investing in Enterprise Products Partners: A Wise Move for a Lifetime of Income?
Enterprise Products Partners (NYSE: EPD) is a master limited partnership (MLP) that operates in the midst of the energy sector, providing infrastructure for the transportation, storage, and processing of energy commodities. With a distribution yield of 6.8%, it stands out as a reliable investment for income-oriented investors.
Key Points:
- Enterprise Products Partners is a midstream MLP that owns energy infrastructure.
- The business has supported a steadily growing distribution.
- The MLP's distribution yield is currently 6.8%.
- The company has increased its distribution annually for 26 consecutive years, including during the coronavirus pandemic and the oil downturn in 2016.
- Enterprise Products Partners has an investment-grade-rated balance sheet and a distributable cash flow that covers the distribution 1.7x.
What Does Enterprise Products Partners Do?
Enterprise Products Partners owns and operates energy infrastructure, including pipelines, storage, processing, and transportation assets. It operates in the "midstream" segment of the energy sector, which connects the upstream (where oil and natural gas are produced) to the downstream (where these commodities are processed). This segment is less affected by volatile commodity prices and more reliant on demand for energy, which tends to be fairly robust through the economic cycle.
How Reliable is Enterprise Products Partners?
Enterprise Products Partners' business is designed to generate reliable cash flows, and its impressive distribution history supports this claim. The company has increased its distribution annually for 26 consecutive years, including during challenging times like the coronavirus pandemic and the oil downturn in 2016. Its investment-grade-rated balance sheet and a distributable cash flow that covers the distribution 1.7x provide further assurance of its reliability.
Should You Invest $1,000 in Enterprise Products Partners Right Now?
While Enterprise Products Partners offers a compelling story for income investors, it's important to consider that the world is increasingly using cleaner energy sources. However, the transition is likely to take decades, and an "all-of-the-above" strategy (including carbon fuels) is more likely to be the final outcome. If you're looking for an investment that can set you up with a lifetime of income, Enterprise Products Partners and its lofty 6.8% distribution yield should be on your shortlist today.
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