Using The Sell-Off To Pick Up This 6% Yielder

Aug.22.11 | About: Enterprise Products (EPD)

In a world of 2% ten-year Treasury yields, finding robust dividend yield in equities with growing earnings and dividend distributions seems a prudent way to deploy money in this chaotic market. One stock that yields over 6% and offers compelling value is Enterprise Product Partners (NYSE:EPD).

Enterprise Products Partners L.P. "provides midstream energy services to producers and consumers of natural gas, NGLs, crude oil, refined products, and petrochemicals in North America. The company's assets include approximately 50,200 miles of onshore and offshore pipelines; 192 million barrels of storage capacity for NGLs, refined products, and crude oil; and 27 billion cubic feet of natural gas storage capacity." (business description from Yahoo Finance)

Here are 8 reasons to like EPD at under $40 a share:

  1. EPD yields 6.1% and has grown its dividend by 6% annually on average over the past half decade.
  2. It is expected to grow revenue in the double digits for both 2011 and 2012 and is priced at under 1 times sales.
  3. EPD has bounced off just below the $40 level several times in the last six months (see chart)
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  5. It is a low-beta stock (.55), has a good balance sheet and a strong asset base.
  6. EPD has a stable set of assets, a great record in increasing distribution, and most revenues come from consistent fees.
  7. It is well-positioned to benefit from the increasing volume of natural gas coming from the Haynesville share area, the Permian Basin and Eagle Ford.
  8. It has several large projects coming on line including a crude pipeline from Cushing to Houston and a new transport system to move methane from the Marcellus shale to the Gulf.
  9. S&P has a $51 price target on EPD and Credit Suisse has it rated "outperformed" and has a price target of $46 on Enterprise Product Partners.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in EPD over the next 72 hours.