Enterprise Products Partners (NYSE: EPD) is a top company for income-seeking investors. The master limited partnership (MLP) offers a big-time distribution yield. At over 7%, it's several times higher than the S&P 500's dividend yield (less than 1.5%).
Here's a closer look at the MLP's monster distribution.
Enterprise Products Partners currently pays investors a quarterly distribution of $0.525 per unit ($2.10 annualized). That's 5% higher than last year's level as the top MLP continues to steadily increase its distribution. This year marked its 26th consecutive year of distribution growth.
The MLP can easily afford its high-yielding distribution. The company has generated $8.4 billion of adjusted cash flow from operations over the last 12 months and distributed $4.4 billion to its limited partners (LPs). It retained the other $4 billion to invest in growing its operations while maintaining a strong financial profile. The MLP has a low 3 times leverage ratio, which backs its A-rated credit (the highest in the midstream sector).
Enterprise Products Partners should have plenty of fuel to continue growing its distribution in the future. It recently agreed to acquire Pinon Midstream in a $950 million deal. The accretive acquisition should add $0.03 per share to its distributable cash flow next year. That doesn't include the expected benefit from commercial and operating synergies.
Meanwhile, the company has $6.7 billion of commercially secured major growth projects in its backlog. These projects should enter commercial service through 2026. That gives it lots of visibility into its ability to grow its cash flow and distributions to unitholders.
Enterprise Products Partners stands out among income investments. The MLP offers a high-yielding payout backed by an extremely strong financial profile. It also has plenty of fuel to continue growing its payout. Because of that, it's a great option for those seeking a lucrative and steadily rising income stream (and are comfortable with receiving the Schedule K-1 Federal Tax Form that MLPs send their LPs each tax year).
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Matt DiLallo has positions in Enterprise Products Partners. The Motley Fool recommends Enterprise Products Partners. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
