Three Reasons to Keep Buying Enterprise Products Partners
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 1 hour ago
0mins
Should l Buy EPD?
Source: Fool
- Attractive Distribution Yield: Enterprise Products Partners offers a distribution yield of approximately 6%, which, while not currently relied upon for passive income, is expected to be a future income source; the company's 27 consecutive years of increasing distributions reflect strong cash flow and stability.
- Stable Historical Performance: Despite the volatility in the oil and gas sector, Enterprise Products Partners has consistently generated stable cash flow over the past 20 years, demonstrating resilience during the 2007-2009 financial crisis and the COVID-19 pandemic from 2020 to 2022, highlighting its business's recession-resistant nature.
- Strong Growth Prospects: The company generated a record $8.7 billion in adjusted cash flow from operations last year, with expectations for a modest 3% increase in cash flow and EBITDA in 2026, while anticipating double-digit growth in 2027 as new assets come online.
- Infrastructure Advantage: With over 50,000 miles of pipeline, Enterprise Products Partners is well-positioned to benefit from the anticipated growth in natural gas demand driven by the expansion of data centers and artificial intelligence systems over the next five years, further solidifying its market position.
Trade with 70% Backtested Accuracy
Stop guessing "Should I Buy EPD?" and start using high-conviction signals backed by rigorous historical data.
Sign up today to access powerful investing tools and make smarter, data-driven decisions.
Analyst Views on EPD
Wall Street analysts forecast EPD stock price to fall
12 Analyst Rating
6 Buy
5 Hold
1 Sell
Moderate Buy
Current: 36.180
Low
33.00
Averages
35.17
High
38.00
Current: 36.180
Low
33.00
Averages
35.17
High
38.00
About EPD
Enterprise Products Partners L.P. is a provider of midstream energy services to producers and consumers of natural gas, natural gas liquids (NGLs), crude oil, refined products and petrochemicals. Its NGL Pipelines & Services segment includes natural gas processing and related NGL marketing activities, NGL pipelines, NGL fractionation facilities, NGL and related product storage facilities and NGL marine terminals. Its Crude Oil Pipelines & Services segment includes crude oil pipelines, crude oil storage and marine terminals and related crude oil marketing activities. Its Natural Gas Pipelines & Services segment includes natural gas pipeline systems that provide for the gathering, treating and transportation of natural gas. Its Petrochemical & Refined Products Services segment includes propylene production facilities; butane isomerization complex and related deisobutanizer (DIB) operations; octane enhancement, iBDH and HPIB production facilities; refined products pipelines, and others.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
Three Reasons to Keep Buying Enterprise Products Partners
- Attractive Distribution Yield: Enterprise Products Partners offers a distribution yield of approximately 6%, which, while not currently relied upon for passive income, is expected to be a future income source; the company's 27 consecutive years of increasing distributions reflect strong cash flow and stability.
- Stable Historical Performance: Despite the volatility in the oil and gas sector, Enterprise Products Partners has consistently generated stable cash flow over the past 20 years, demonstrating resilience during the 2007-2009 financial crisis and the COVID-19 pandemic from 2020 to 2022, highlighting its business's recession-resistant nature.
- Strong Growth Prospects: The company generated a record $8.7 billion in adjusted cash flow from operations last year, with expectations for a modest 3% increase in cash flow and EBITDA in 2026, while anticipating double-digit growth in 2027 as new assets come online.
- Infrastructure Advantage: With over 50,000 miles of pipeline, Enterprise Products Partners is well-positioned to benefit from the anticipated growth in natural gas demand driven by the expansion of data centers and artificial intelligence systems over the next five years, further solidifying its market position.
See More
Investment Comparison: Energy Transfer vs. Enterprise Products Partners
- Financial Metrics Comparison: Energy Transfer boasts a current distribution yield of 7.1% with a coverage ratio of 1.8x, and while its leverage ratio stands at 4.0-4.5x, it remains within target range, indicating stable cash flow and dividend capacity, making it appealing for income-seeking investors.
- Growth Potential Analysis: Enterprise Products Partners is nearing the end of a multi-year capital deployment cycle initiated in 2022, with an expected investment of $2.5 billion to $2.9 billion in expansion projects this year, which will significantly boost its free cash flow and enhance future distribution capabilities.
- Expansion Plans: Energy Transfer plans to invest $5 billion to $5.5 billion in growth capital projects in 2023, with several major pipeline expansions set to enter commercial service by 2030, supporting its annual distribution growth of 3% to 5%.
- Investment Recommendation: While both are excellent income stock investments, Energy Transfer stands out as the better dividend investment this year due to its lower valuation and clearer long-term growth prospects, potentially yielding higher total returns in 2026 and beyond.
See More
Comparison of Dividend Yields in Energy Midstream Giants
- Dividend Yield Analysis: Energy Transfer currently offers a dividend yield of 7.1%, surpassing Enterprise Products Partners' 6%, despite having a distribution coverage ratio of 1.8x, indicating stronger cash flow stability that appeals to income-seeking investors.
- Capital Expenditure Plans: Enterprise Products Partners plans to invest between $2.5 billion and $2.9 billion in expansion projects in 2023, which is expected to significantly boost free cash flow and support its 27-year streak of dividend growth, enhancing its long-term investment appeal.
- Expansion Project Progress: Energy Transfer anticipates investing $5 billion to $5.5 billion in growth capital projects in 2023, including the $2.7 billion Hugh Brinson Pipeline and the $5.6 billion Transwestern Pipeline expansion, which are expected to drive annual dividend growth of 3% to 5%.
- Market Competitiveness: While Energy Transfer's lower valuation results in a higher dividend yield, Enterprise Products Partners maintains competitiveness in the market through its diversified operations and stable cash flow, attracting investors with varying risk appetites.
See More
Challenges in Finding Quality Stocks in Today's Market
- Stability of Enterprise Products: As a large midstream energy company, Enterprise Products Partners maintains a net margin exceeding 10% through its diverse asset portfolio, and it plans to invest between $2.5 billion and $2.9 billion this year for capital expenditures, thereby expanding its revenue base.
- Attractive Dividend Yield: Despite a recent rise in share price, Enterprise's forward P/E remains just above 13, with a dividend yield nearing 5.9%, significantly higher than the average of S&P 500 components, highlighting its appeal as an investment choice.
- Bristol Myers' Transformation Challenges: After thriving on blockbuster drugs like Revlimid and Eliquis, Bristol Myers faces pressure from patent expirations, and while its new drug Opdivo saw a 16% year-over-year revenue increase, total revenue only grew by 1%, indicating the difficulties of its transformation.
- Undervalued P/E Ratio: With a forward P/E below 10, Bristol Myers appears undervalued amid skepticism about its transformation, even as it offers a 4.2% dividend yield, making it an attractive option for value-seeking investors in the large pharma sector.
See More
Investors Shift to High Dividend Stocks to Mitigate AI Risks
- Dividend Stocks Outperform: Investor Jenny Harrington notes that dividend-paying stocks have excelled this year, with the iShares Select Dividend ETF up nearly 11% year-to-date, contrasting with the S&P 500's flat performance, indicating a shift in investor preference towards traditional economy stocks.
- Market Rebalancing Trend: Harrington highlights that investors are recognizing the “irrationally wide” performance and valuation gaps between big tech and old economy stocks, prompting a portfolio rebalancing to mitigate uncertainties posed by artificial intelligence disruptions.
- Quality Dividend Stock Picks: Harrington recommends Kimberly-Clark, which has gained over 7% year-to-date and offers a 4.66% dividend yield, emphasizing its 92 years of dividend payments and 54 years of increases, showcasing its stable financial performance and growth potential.
- Attractive REIT Investment: Vici Properties, a REIT leasing to Las Vegas casinos, offers a 6.06% dividend yield, with tenants experienced in navigating economic downturns, suggesting continued growth and dividend increases in the future.
See More
Enterprise Products Partners Growth Potential Analysis
- Stable Income Source: Enterprise Products Partners has seen its stock price rise by 68% over the past five years, with a total return of 141%, highlighting its appeal as a reliable income stock, especially in a volatile market environment.
- Cash Flow Growth: From 2020 to 2024, the company's distributable cash flow (DCF) is expected to increase from $6.41 billion to $7.84 billion, with the distribution coverage ratio improving from 1.6x to 1.7x, indicating a continued strengthening of its financial health.
- Profitability Improvement: Earnings per unit (EPU) is projected to rise from $1.71 in 2020 to $2.69 in 2024, reflecting the company's success in expanding its pipeline network, particularly in key areas like the Permian Basin.
- Future Stock Price Forecast: Analysts expect the EPU to grow at a CAGR of 5.6% from 2024 to 2028, reaching $3.35, and if this growth continues through 2031, the stock price could potentially increase by about 40% to $52 over the next five years.
See More
Three Reasons to Keep Buying Enterprise Products Partners
- Attractive Distribution Yield: Enterprise Products Partners offers a distribution yield of approximately 6%, which, while not currently relied upon for passive income, is expected to be a future income source; the company's 27 consecutive years of increasing distributions reflect strong cash flow and stability.
- Stable Historical Performance: Despite the volatility in the oil and gas sector, Enterprise Products Partners has consistently generated stable cash flow over the past 20 years, demonstrating resilience during the 2007-2009 financial crisis and the COVID-19 pandemic from 2020 to 2022, highlighting its business's recession-resistant nature.
- Strong Growth Prospects: The company generated a record $8.7 billion in adjusted cash flow from operations last year, with expectations for a modest 3% increase in cash flow and EBITDA in 2026, while anticipating double-digit growth in 2027 as new assets come online.
- Infrastructure Advantage: With over 50,000 miles of pipeline, Enterprise Products Partners is well-positioned to benefit from the anticipated growth in natural gas demand driven by the expansion of data centers and artificial intelligence systems over the next five years, further solidifying its market position.
See More
Investment Comparison: Energy Transfer vs. Enterprise Products Partners
- Financial Metrics Comparison: Energy Transfer boasts a current distribution yield of 7.1% with a coverage ratio of 1.8x, and while its leverage ratio stands at 4.0-4.5x, it remains within target range, indicating stable cash flow and dividend capacity, making it appealing for income-seeking investors.
- Growth Potential Analysis: Enterprise Products Partners is nearing the end of a multi-year capital deployment cycle initiated in 2022, with an expected investment of $2.5 billion to $2.9 billion in expansion projects this year, which will significantly boost its free cash flow and enhance future distribution capabilities.
- Expansion Plans: Energy Transfer plans to invest $5 billion to $5.5 billion in growth capital projects in 2023, with several major pipeline expansions set to enter commercial service by 2030, supporting its annual distribution growth of 3% to 5%.
- Investment Recommendation: While both are excellent income stock investments, Energy Transfer stands out as the better dividend investment this year due to its lower valuation and clearer long-term growth prospects, potentially yielding higher total returns in 2026 and beyond.
See More
Comparison of Dividend Yields in Energy Midstream Giants
- Dividend Yield Analysis: Energy Transfer currently offers a dividend yield of 7.1%, surpassing Enterprise Products Partners' 6%, despite having a distribution coverage ratio of 1.8x, indicating stronger cash flow stability that appeals to income-seeking investors.
- Capital Expenditure Plans: Enterprise Products Partners plans to invest between $2.5 billion and $2.9 billion in expansion projects in 2023, which is expected to significantly boost free cash flow and support its 27-year streak of dividend growth, enhancing its long-term investment appeal.
- Expansion Project Progress: Energy Transfer anticipates investing $5 billion to $5.5 billion in growth capital projects in 2023, including the $2.7 billion Hugh Brinson Pipeline and the $5.6 billion Transwestern Pipeline expansion, which are expected to drive annual dividend growth of 3% to 5%.
- Market Competitiveness: While Energy Transfer's lower valuation results in a higher dividend yield, Enterprise Products Partners maintains competitiveness in the market through its diversified operations and stable cash flow, attracting investors with varying risk appetites.
See More
Challenges in Finding Quality Stocks in Today's Market
- Stability of Enterprise Products: As a large midstream energy company, Enterprise Products Partners maintains a net margin exceeding 10% through its diverse asset portfolio, and it plans to invest between $2.5 billion and $2.9 billion this year for capital expenditures, thereby expanding its revenue base.
- Attractive Dividend Yield: Despite a recent rise in share price, Enterprise's forward P/E remains just above 13, with a dividend yield nearing 5.9%, significantly higher than the average of S&P 500 components, highlighting its appeal as an investment choice.
- Bristol Myers' Transformation Challenges: After thriving on blockbuster drugs like Revlimid and Eliquis, Bristol Myers faces pressure from patent expirations, and while its new drug Opdivo saw a 16% year-over-year revenue increase, total revenue only grew by 1%, indicating the difficulties of its transformation.
- Undervalued P/E Ratio: With a forward P/E below 10, Bristol Myers appears undervalued amid skepticism about its transformation, even as it offers a 4.2% dividend yield, making it an attractive option for value-seeking investors in the large pharma sector.
See More
Investors Shift to High Dividend Stocks to Mitigate AI Risks
- Dividend Stocks Outperform: Investor Jenny Harrington notes that dividend-paying stocks have excelled this year, with the iShares Select Dividend ETF up nearly 11% year-to-date, contrasting with the S&P 500's flat performance, indicating a shift in investor preference towards traditional economy stocks.
- Market Rebalancing Trend: Harrington highlights that investors are recognizing the “irrationally wide” performance and valuation gaps between big tech and old economy stocks, prompting a portfolio rebalancing to mitigate uncertainties posed by artificial intelligence disruptions.
- Quality Dividend Stock Picks: Harrington recommends Kimberly-Clark, which has gained over 7% year-to-date and offers a 4.66% dividend yield, emphasizing its 92 years of dividend payments and 54 years of increases, showcasing its stable financial performance and growth potential.
- Attractive REIT Investment: Vici Properties, a REIT leasing to Las Vegas casinos, offers a 6.06% dividend yield, with tenants experienced in navigating economic downturns, suggesting continued growth and dividend increases in the future.
See More
Enterprise Products Partners Growth Potential Analysis
- Stable Income Source: Enterprise Products Partners has seen its stock price rise by 68% over the past five years, with a total return of 141%, highlighting its appeal as a reliable income stock, especially in a volatile market environment.
- Cash Flow Growth: From 2020 to 2024, the company's distributable cash flow (DCF) is expected to increase from $6.41 billion to $7.84 billion, with the distribution coverage ratio improving from 1.6x to 1.7x, indicating a continued strengthening of its financial health.
- Profitability Improvement: Earnings per unit (EPU) is projected to rise from $1.71 in 2020 to $2.69 in 2024, reflecting the company's success in expanding its pipeline network, particularly in key areas like the Permian Basin.
- Future Stock Price Forecast: Analysts expect the EPU to grow at a CAGR of 5.6% from 2024 to 2028, reaching $3.35, and if this growth continues through 2031, the stock price could potentially increase by about 40% to $52 over the next five years.
See More
