Enterprise Products Partners L.P. (EPD) is a company with assets that are vital for the safe transportation of commodities to support growing economies, notes Rida Morwa, editor of High Dividend Opportunities.
Enterprise Products is a leading U.S. midstream company that operates over 50,000 miles of pipelines; over 260 million barrels of storage capacity for NGLs, crude oil, petrochemicals, and refined products; and 14 billion cubic feet of natural gas storage capacity.
Last year, Americans in mid-Atlantic states and across the southeast faced gas shortages following the cyberattack on the Colonial Pipeline. This made the Biden administration realize the importance of reliable supply and the role of pipelines in ensuring that.
At a White House press briefing, Energy Secretary Jennifer Granholm said that pipes are the best way to go for an efficient and safe supply of commodities. Transporting energy commodities by pipeline is significantly more affordable than rail. Access to these pipelines proves critical for overall energy independence and affordability, mainly when oil prices spike.
EPD management demonstrated spectacular shareholder stewardship with 24 consecutive years of distribution growth. The company recently announced a 5.6% YoY increase, and the current payout is an attractive 7.2% yield. The return to shareholders doesn't end there. The partnership announced the repurchase of $35 million of its common units during Q2.
EPD still has ~75% of its authorized $2.0 billion buyback program, indicating that the number of outstanding shares will shrink a lot more in the upcoming quarters.
With over 32% of common units owned by insiders, it is safe to say that management has the best interests of shareholders at heart and will continue shareholder-friendly decision-making.
With its business primarily oriented towards commodities that form feedstock for manufacturing and industrial products, EPD has a bright future.
EPD maintains an investment-grade balance sheet with a 3.4x leverage ratio at the end of Q2. With an average interest rate of 4.3% and 95% fixed rate debt, the company is at a comfortable spot for a rising rate environment. Look past the uncertainties in the market and grab this 7.2% yield for dependable income.
Note: EPD is a Master Limited Partnership that issues a schedule K-1 for tax purposes. EPD reports earnings on the morning of August 3rd.
