It’s easy to lose sight of the reliable, calm and steady players in the investment world, where trends may be as unpredictable as rollercoasters. Enterprise Products Partners (NYSE: EPD) is a stock like this, with a lot more going for it than meets the eye.
The North American oil giant’s 7.5% distribution yield may not be as exciting as that of some of its peers, but it is a safe haven for income investors in both rising and falling markets.
The energy industry is crowded, so let’s break down what makes Enterprise Products Partners stand out. There are three distinct segments within the energy sector: upstream (oil exploration), midstream (oil transportation via pipelines), and downstream (chemicals and refining). Enterprise performs successfully in the midstream sector, which is distinct from the upstream and downstream sectors, which are particularly sensitive to fluctuations in energy prices.
Picture the middle of the stream as a bridge’s toll booth. By charging users for access to their critical infrastructure, businesses may generate consistent revenue. Enterprise has one of the most comprehensive midstream offerings in the Americas.
Despite economic hardships, the demand for these assets continues to rise, making them crucial to the MLP’s health.
Enterprise’s history of success demonstrates this toughness. For the past quarter-century, it has steadily rewarded shareholders with higher payouts. The partnership has a solid financial footing, with an investment-grade balance sheet and distributable cash flow matching payments more than one and a half times over.
The catch for those hoping to profit from fast expansion is as follows: The growth of Enterprise depends on a number of major capital expenditure initiatives.
However, the number of promising projects is decreasing because the most promising ones have already been built. Therefore, gradual but consistent expansion is the goal.
The 7.5% dividend yield, though, is a silver lining. It provides a long-term return for investors that is quite close to the market average of 10%.
A total return of 10% appears very solid, independent of market conditions, when you factor in a moderate dividend growth rate of 2.5 percent. Enterprise’s essential infrastructure assets are the cornerstone of its resilience in good times and bad.
Although steady, profitable, and cautious may not be conversation starters at your next social event, they are essential traits for success in the world of investing.
For the next bull market, the next down market, and every twist and turn in between, Enterprise Products Partners should be at the top of your list if you’re looking for a high-yielding, passive income investment.
Sometimes it’s the boring, consistent investments like Enterprise that silently add up to a successful portfolio, and that might be easy to forget in a world where showy investments get all the attention. Trust Enterprise if you need reliability; it may not be glamorous, but it’s as reliable as a rock.