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Enterprise Products Partners L.P. provides midstream energy services to business and consumers in North America. EPD has 52,000 miles of pipelines, 192 million barrels of storage capacity for Natural gas liquids, crude oil and refined products. In addition to this it also has 27 billion cubic feet of natural-gas storage capacity. All its business is conducted through a subsidiary (Enterprise Operating LLC). The company is managed and controlled by Enterprise GP, which has a general partner interest in it.

Enterprise operates in six business segments: NGL Pipelines & Services, Onshore Crude Oil Pipelines & Services, Onshore Natural Gas Pipelines & Services, Petrochemical & Refined Products Services, Offshore Pipelines & Services and NGL fractionation, etc

The majority of the historical data (key ratios) was provided by Zacks.com; after trying many sources on the net, like Yahoo Finance, daily finance, etc. we found their data to be the most accurate and reliable. A lot of key ratios are going to be mentioned in this article, and hence we think it would be best for investors to get a handle on some of these ratios as they could prove to be very useful in terms of spotting potential winners.

Levered free cash flow is the amount of cash available to stock holders after interest payments on debt are made. A company with a small amount of debt will only have to spend a modest amount of money on interest payments, which in turn means that there is more money to send to shareholders in the form of dividends and vice versa.

Operating cash flow is generally a better metric than earnings per share because a company can show positive net earnings and still not be able to properly service its debt; the cash flow is what pays the bills.

The payout ratio tells us what portion of the profit is being returned to investors. A payout ratio over 100% indicates that the company is paying out more money to shareholders, then they are making; this situation cannot last forever. In general if the company has a high operating cash flow and access to capital markets, they can keep this going on for a while.

As companies usually only pay the portion of the debt that is coming due and not the whole debt, this technique/trick can technically be employed to maintain the dividend for sometime. If the payout ratio continues to increase, the situation warrants close monitoring. If your tolerance for risk is a low, look for similar companies with the same or higher yields, but with lower payout ratios. Individuals searching for other ideas might find this article to be of interest 5 Great Plays With Yields As High As 13.2%.

Debt to Equity Ratio is found by dividing the company's total amount of long-term debt (debts with interest rates that have a maturity longer than one year) by the total amount of equity. A debt to equity ratio of 0.5 tells us that the company is using 50 cents of liabilities in addition to each $1 of shareholders equity in the business. There is no fixed ideal number as it depends on the industry the company is in. However, in general a ratio under 1 is acceptable and ideally it should be in the 0.5-0.6 range.

Current Ratio is obtained by dividing the current assets by current liabilities. This ratio allows you to see if the company can pay its current debts without potentially jeopardizing their future earnings. Ideally the company should have a ratio of 1 or higher.

Price to free cash flow is obtained by dividing the share price by free cash flow per share. Higher ratios are associated with more expensive companies and vice versa; lower ratios are generally more attractive. If a company generated 400 million in cash flow and then spent 100 million on capital expenditure, then its free flow is $300 million. If the share price is 100 and the free cash flow per share are $5, then company trades at 20 times free cash flow. This ratio is also useful because it can be used as a comparison to the average within the industry; this gives you an idea of how the company you are interested in holds up to the other companies within the industry.

Interest coverage is usually calculated by dividing the earnings before interest and taxes for a period of 1 year by the interest expenses for the same time period. This ratio informs you of a company's ability to make its interest payments on its outstanding debt. Lower interest coverage ratios indicate that there is a larger debt burden on the company and vice versa.

Price to tangible book is obtained by dividing share price by tangible book value per share. The ratio gives investors some idea of whether they are paying too much for what would be left over if the company were to declare bankruptcy immediately. In general stocks that trade at higher price to tangible book value could leave investors facing a great percentage per share loss than those that trade at lower ratios. The price to tangible book value is theoretically the lowest possible price the stock would trade to.

Quick ratio or acid test is obtained by adding cash and cash equivalents plus marketable securities and accounts receivable dividing them by current liabilities. It is a measure of a company's ability to use its quick assets (assets that can be sold of immediately at close to book value) to pay off its current liabilities immediately. A company with a quick ratio of less than 1 cannot pay back its current liabilities. Additional key metrics are addressed in this article: "5 Interesting Plays With Yields As High As 16%"

Company: Enterprise Prod (EPD)

Basic Key ratios

  • Percentage Held by Insiders = 34.7
  • Market Cap ($mil) = 43730
  • Number of Institutional Sellers 12 Weeks = N/A
  • 3 Month % Chg Short Interest = n/a

Growth

  • Net Income ($mil) 12/2011 = 2047
  • Net Income ($mil) 12/2010 = 321
  • Net Income ($mil) 12/2009 = 204
  • 12mo Net Income this Q/ 12mo Net Income 4Q's ago = 61.59
  • Q Net Income this Q/ same qtr yr ago = 351.25
  • EBITDA ($mil) 12/2011 = N/A
  • EBITDA ($mil) 12/2010 = 2152
  • EBITDA ($mil) 12/2009 = 1853
  • Net Income Rpt Qtr ($mil) = 721
  • Anl Net Income this Yr/ Net Income last Yr = 538.08
  • Cash Flow ($/sh) 12/2011 = N/A
  • Cash Flow ($/sh) 12/2010 = 0.46
  • Cash Flow ($/sh) 12/2009 = 1.77
  • Div 5yr Growth 12/2011 = 5.83
  • Sales ($mil) 12/2011 = 44313
  • Sales ($mil) 12/2010 = 33739
  • Sales ($mil) 12/2009 = 25511

Sales, net income and operating cash flow have been generally been trending upwards for the past 3 years. Net income really exploded upwards in 2010, jumping from $321 million in 2010 to $2.04 billion in 2011. Sales came in 1 billion higher from the prior year. Earnings per share after dipping in 2010 are on the rise again and are projected to grown once again in 2012.

Dividend history

  • Div Yield = 5.00
  • Div Yld 5 Yr Avg 12/2011 = 6.78
  • Div Yld 5 Yr Avg 09/2011 = 6.83
  • Annual Dividend 12/2011 = 2.41
  • Annual Dividend 12/2010 = 2.29
  • Forward Yield = 4.94
  • Div 5yr Growth 12/2011 = 5.83
  • R-squared Div Growth 12/2011 = 1
  • R-squared Div Growth 09/2011 = 1

It has a very stellar dividend payment history. It has consecutively increased its dividend for 13 years. It has a great five year dividend yield average of 6.78% and an acceptable five year dividend growth rate of 5.83%. It just recently raised its dividend from 61.25 cents to 62 cents.

Dividend sustainability

  • Payout Ratio 09/2011 = 1.21
  • Payout Ratio 06/2011 = 1.25
  • Payout Ratio 5 Yr Avg 12/2011 = 1.35
  • Payout Ratio 5 Yr Avg 09/2011 = 1.38
  • Payout Ratio 5 Yr Avg 06/2011 = 1.39
  • Change in Payout Ratio = -0.24

As EPD is a MLP, the payout ratio is not that important. MLPS generally pay a majority of their cash flow as distributions. Payout ratios are calculated by dividing the dividend/distribution rate by the net income per share, and this is why the payout ratio for MLPs is often higher than 100%. The more important ratio to focus on is the cash flow per unit. If one focuses on the cash flow per unit, one will see that in most cases, it exceeds the distribution declared per unit. As its cash flow and net income have both been trending upwards for the past few years, it should have no problem making its dividend payments.

Performance

  • % Ch Price 52 Wks Rel to S&P 500 = 16.47
  • Std Dev Target Price Est = 3.18
  • Avg EPS Surprise Last 4 Qtr = 11.81
  • EPS % Change F2/F1 = 7.07
  • Next 3-5 Yr Est EPS Gr rate = 5
  • Std Dev 3-5 Yr Est EPS Gr rate = N/A
  • EPS Gr Q(1)/Q(-3) = -145.65
  • 5 Yr Hist EPS Gr 12/2011 = 15.84
  • 5 Yr Hist EPS Gr 09/2011 = 15.93

Projected EPS growth

  • ROE 5 Yr Avg 12/2011 = 12.39
  • ROE 5 Yr Avg 09/2011 = 12.03
  • ROE 5 Yr Avg 06/2011 = 11.85
  • Return on Investment 12/2011 = 7.51
  • Return on Investment 09/2011 = 6.08
  • Return on Investment 06/2011 = 5.81
  • Debt/Tot Cap 5 Yr Avg 12/2011 = 54.39
  • Debt/Tot Cap 5 Yr Avg 09/2011 = 53.95
  • Debt/Tot Cap 5 Yr Avg 06/2011 = 53.36
  • Current Ratio 12/2011 = N/A
  • Current Ratio 09/2011 = 0.83
  • Current Ratio 06/2011 = 0.81
  • Curr Ratio 5 Yr Avg = 0.95
  • Quick Ratio = 0.74
  • Cash Ratio = 0.09
  • Interest Coverage 12/2011 = N/A
  • Interest Coverage 09/2011 = 3.6
  • Interest Coverage 06/2011 = 3.42

Valuation

  • Book Value Qtr ($/sh) 12/2011 = N/A
  • Book Value Qtr ($/sh) 09/2011 = 12.78
  • Book Value Qtr ($/sh) 06/2011 = 13.93
  • Anl EPS before NRI 12/2011 = 2.21
  • Anl EPS before NRI 12/2010 = 1.39
  • Anl EPS before NRI 12/2009 = 1.81
  • Anl EPS before NRI 12/2008 = 1.85
  • Anl EPS before NRI 12/2007 = 0.96
  • Price/ Book = 3.93
  • Price/ Cash Flow = 109.76
  • Price/ Sales = 0.99
  • EV/EBITDA 12 Mo = 26.83
  • P/E/G F1 = 4.11
  • Q1 Std Dev/ Consensus = 0.07
  • R-squared EPS Growth 12/2011 = 0.75
  • R-squared EPS Growth 09/2011 = 0.76
  • P/E F1/ LT EPS Gr = 4.11
  • Std Dev Cons Current Qtr = 0.04
  • Median Est Next Qtr = 0.58
  • # Anlst in Cons Q3 = 10

Additional data

This chart clearly indicates the correlation between brokers recommendations and price performance are sketchy, demonstrating that perhaps taking the contrarian approach is the best way to go when it comes to taking advice from your broker.

Related companies (PEER Group)

Company: Plains All Amer (PAA)

Basic Key ratios

  • Percentage Held by Insiders = 1
  • Market Cap ($mil) = 11783
  • # of Ins Sellers 12 Weeks = 1
  • 3M % Chg Short Interest = N/A

Growth

  • Net Income ($mil) 12/2011 = 966
  • Net Income ($mil) 12/2010 = 514
  • Net Income ($mil) 12/2009 = 580
  • Cash Flow ($/sh) 12/2011 = N/A
  • Cash Flow ($/sh) 12/2010 = 6.22
  • Cash Flow ($/sh) 12/2009 = 5.81
  • Sales ($mil) 12/2011 = 34275
  • Sales ($mil) 12/2010 = 25893
  • Sales ($mil) 12/2009 = 18520

Dividend history

  • Div Yield = 5.2
  • Div Yld 5 Yr Avg 12/2011 = 6.89
  • Annual Dividend 12/2011 = 3.91
  • frwd yld = 5.2
  • Div 5yr Growth 12/2011 = 4.32
  • R-squared Div Growth 12/2011 = 0.98
  • R-squared Div Growth 09/2011 = 0.94

Dividend sustainability

  • Payout Ratio 09/2011 = 0.86
  • Payout Ratio 06/2011 = 1.01
  • Payout Ratio 5 Yr Avg 12/2011 = 1.15
  • Payout Ratio 5 Yr Avg 09/2011 = 1.16
  • Payout Ratio 5 Yr Avg 06/2011 = 1.15
  • Change in Payout Ratio = -0.38

Performance

  • EPS Gr Q(1)/Q(-3) = -166.67
  • 5 Yr Hist EPS Gr 12/2011 = 6.69
  • ROE 5 Yr Avg 12/2011 = 13.75
  • ROE 5 Yr Avg 09/2011 = 13.62
  • ROE 5 Yr Avg 06/2011 = 13.77
  • Return on Investment 12/2011 = 9.89
  • Return on Investment 09/2011 = 8.9
  • Return on Investment 06/2011 = 7.83
  • Debt/Tot Cap 5 Yr Avg 12/2011 = 47.32
  • Debt/Tot Cap 5 Yr Avg 09/2011 = 47.3
  • Debt/Tot Cap 5 Yr Avg 06/2011 = 47
  • Interest Coverage 12/2011 = N/A
  • Interest Coverage 09/2011 = 5.74
  • Interest Coverage 06/2011 = 4.9

Company: Enbridge Inc (ENB)

Basic Key ratios

  • Percentage Held by Insiders = N/A
  • Market Cap ($mil) = 30385
  • # of Ins Sellers 12 Weeks = N/A
  • 3M % Chg Short Interest = N/A

Growth

  • Net Income ($mil) 12/2011 = N/A
  • Net Income ($mil) 12/2010 = 942
  • Net Income ($mil) 12/2009 = 1375
  • Cash Flow ($/sh) 12/2011 = N/A
  • Cash Flow ($/sh) 12/2010 = 2.4
  • Cash Flow ($/sh) 12/2009 = 1.96
  • Sales ($mil) 12/2011 = N/A
  • Sales ($mil) 12/2010 = 15291
  • Sales ($mil) 12/2009 = 11755

Dividend history

  • Div Yield = 2.51
  • Div Yld 5 Yr Avg 12/2011 = 3.27
  • Annual Dividend 12/2011 = 1.01
  • Annual Dividend 12/2010 = 0.82
  • frwd yld = 2.9
  • Div 5yr Growth 12/2011 = 14.56

Dividend sustainability

  • Payout Ratio 09/2011 = 0.71
  • Payout Ratio 06/2011 = 0.75
  • Payout Ratio 5 Yr Avg 12/2011 = 0.7
  • Payout Ratio 5 Yr Avg 09/2011 = 0.7
  • Payout Ratio 5 Yr Avg 06/2011 = 0.69
  • Change in Payout Ratio = 0.01

Performance

  • % Ch Price 52 Wks Rel to S&P 500 = 31.86
  • ROE 5 Yr Avg 12/2011 = 12.31
  • Return on Investment 09/2011 = 4.68
  • Debt/Tot Cap 5 Yr Avg 12/2011 = 63.3
  • Current Ratio 09/2011 = 1.16
  • Curr Ratio 5 Yr Avg = 1.02
  • Quick Ratio = 0.88
  • Cash Ratio = 0.07
  • Interest Coverage 09/2011 = 0.92

Company: Sunoco Logistic (SXL)

Basic Key ratios

  • Percentage Held by Insiders = 0.88
  • Market Cap ($mil) = 3970
  • # of Ins Sellers 12 Weeks = N/A
  • 3M % Chg Short Interest = n/a

Growth

  • Net Income ($mil) 12/2011 = 313
  • Net Income ($mil) 12/2010 = 346
  • Net Income ($mil) 12/2009 = 250
  • Cash Flow ($/sh) 12/2011 = N/A
  • Cash Flow ($/sh) 12/2010 = 2.74
  • Cash Flow ($/sh) 12/2009 = 3.23
  • Sales ($mil) 12/2011 = 10918
  • Sales ($mil) 12/2010 = 7838
  • Sales ($mil) 12/2009 = 5430

Dividend history

  • Div Yield = 4.21
  • Div Yld 5 Yr Avg 12/2011 = 6.41
  • Annual Dividend 12/2011 = 1.61
  • Annual Dividend 12/2010 = 1.51
  • frwd yld = 4.21
  • Div 5yr Growth 12/2011 = 10.01

Dividend sustainability

  • Payout Ratio 09/2011 = 0.67
  • Payout Ratio 06/2011 = 0.73
  • Payout Ratio 5 Yr Avg 12/2011 = 0.83
  • Payout Ratio 5 Yr Avg 09/2011 = 0.86
  • Payout Ratio 5 Yr Avg 06/2011 = 0.88
  • Change in Payout Ratio = -0.27

Performance

  • % Ch Price 52 Wks Rel to S&P 500 = 38.9
  • 5 Yr Hist EPS Gr 12/2011 = 20.28
  • 5 Yr Hist EPS Gr 09/2011 = 19.81
  • ROE 5 Yr Avg 12/2011 = 26.44
  • ROE 5 Yr Avg 09/2011 = 25.63
  • Return on Investment 12/2011 = 13.91
  • Debt/Tot Cap 5 Yr Avg 12/2011 = 52.21
  • Current Ratio 09/2011 = 1.15
  • Curr Ratio 5 Yr Avg = 1.04
  • Quick Ratio = 1.02
  • Cash Ratio = 0.03
  • Interest Coverage 09/2011 = 5
  • Interest Coverage 06/2011 = 5.86

Williams Companies, Inc. (WMB)

It has a free cash flow rate of $552 million, a current ratio of 1.18 and an interest coverage ratio of 3.50.

Net income for the past three years

  • 2009= $1.4 billion
  • 2010= $-285 million
  • 2011= $ -1.09 billion
  • Projected 2011= It stands at $820 million and could top the $ 970 million mark.

Operating cash flow the past three years has been on the rise

  • 2009= $3.3 billion
  • 2010= $2.5 billion
  • 2011= 2.65 billion
  • Projected 2011= it stands at $2.3 billion and could top the $3.00 billion mark.

  • Dividend yield 5 year average = 2.40%
  • Dividend rate = $ 1.04
  • Dividend growth rate 3 year avg = 24.12
  • Dividend growth rate 5 year avg = 19.13%
  • Consecutive dividend increases = 7 years
  • Paying dividends since = 1974
  • Total return last 3 years = 178%
  • Total return last 5 years = 46%

Conclusion

Out of the mentioned companies our favourite is EPD and we like it for the following reasons;

  • Net income exploded in 2011 jumping from $321 million in 2010 to over $ 2billion i 2011
  • Operating cash flow and sales are also trending upwards for the past several years. In 2011 Operating cash flow increased by $300 million and sales by $1 billion.
  • ROE= 13%
  • ROI= 7.51%
  • 5 year dividend average= 6.78%
  • 5 year dividend growth rate= 5.83%
  • 3 year total return = 147%
  • Quarterly revenue growth rate= 40%
  • Consecutive dividend increases = 14 years
  • Increased its dividend from 60.5 cents to 61.3 cents.
  • The Haynesville Acadian Expansion and Eagle Ford projects should enable Enterprise to take a lead role in the development of natural gas liquids and natural gas infrastructure. This project should generate another $180-$200 million towards the cash flow. This project was completed roughly $100 million below the original projected cost. The Mont Belvieu fractionator has already started to contribute to its cash flow.
  • It has over $4.5 billion worth in new project expansions which are due to come online between 2012 and 2014. Successful completion of these projects should have a significant impact on cash flow.
  • It has partnered with Enbridge energy partners and Anadarko petroleum to build a brand new NGL pipeline (The Texas express pipeline). This project will expand its footprint and help the partnership ship expand into new markets.
  • A decent interest rate coverage ratio of 3.42
  • Management appears committed increasing share holder value; the dividend was increased once again from 61.2 cents to 62 cents.
  • Finally, 100K invested in EPD for 10 years would have grown to $276K for an annualized ROR of roughly 10.8%

Sources: All dividend history charts supplied courtesy of dividata.com; a majority of the historical data used in this article was supplied by zacks.com. Free cash flow per share, broker recommendation and projected EPS growth charts sourced from zacks.com

Disclaimer: This list of stocks is meant to serve as a starting point. Please do not treat this as a buying list. It is very important that you check the finer details, do your due diligence and then determine if any of the above plays meet with your risk tolerance levels. The Latin maxim caveat emptor applies -- let the buyer beware.

Source: Enterprise Products Is A Great Long-Term Play