Seekers of top-tier high-yielding stocks may find solace in Enterprise Products Partners (NYSE: EPD), an unassuming force in the energy sector that boasts a bountiful dividend yield exceeding 7%, with a commendable track record of enhancing its annual dividend for a quarter of a century.
Unassuming Yet Rewarding
Wild swings in the pricing of natural gas, oil, and other fossil fuels have nudged some investors towards less volatile assets offering greater immediate predictability. The energy domain has weathered multiple storms, navigating economic upheavals, surging demand, and climbing wholesale rates, pushing numerous energy purveyors to vend at unyielding prices.
Yet, sprinkling stardust over this tumultuous landscape is Enterprise Products Partners. This midstream entity unfurls its operations as an intermediary in natural gas liquids, crude oil, and petrochemical pipelines and services. Unlike firms enmeshed in extraction and production, Enterprise Products Partners stands as a bulwark offering storage, processing, and conveyance services. Operating one step removed from the direct-to-customer supply chain imbues the company with protection from external tempests that typically beset energy suppliers.
The company’s modus operandi involves charging energy providers for storage, processing, and transit services, endowing it with a shield against energy price vagaries. This strategic positioning has enabled Enterprise Products Partners to ring-fence its cash flow amidst the undulating energy landscape, facilitating sustained increments in its dividend.
The current dividend yield of 7% extended by the company presents a tantalizing allure for investors keen on enhancing their long-term investment portfolio performance, significantly eclipsing the S&P 500’s paltry 1.3% yield.
Enterprise Products Partners heralded a fruitful first quarter in late April, with net income attributable to common unitholders pegged at $1.5 billion, translating to $0.66 per unit after full dilution—a 5% ascent from the preceding year’s quarter.
The first-quarter distributions also received a fillip, up 5.1% to $0.515 per common unit, totaling $2.06 for the year. On July 10, the company unfurled its declaration of a $0.525 per unit second-quarter quarterly cash distribution, totaling $2.10 annually per unit.
Ripe for Exploration
Apart from its lofty yield, Enterprise Products Partners finds itself halfway through a $2 billion unit buyback authorization—a further nod to its robust financial position.
The likelihood of Enterprise Products Partners paring down its bewitching distribution remains a distant specter in the near future. While other energy sectors grapple with price volatility, this particular company has smartly installed itself as a vendor ensconced firmly in the heart of the supply chain, unfurling a vast vista of opportunity for itself and its investors in the long haul.
On the fulcrum of these facts, delving into the prospects presented by Enterprise Products Partners stands as a venture worth contemplating.
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Jacob Wolinsky possesses no stake in the stocks referenced. The Motley Fool endorses Enterprise Products Partners.