Before I start discussing the investment merits of Enterprise Product Partners L.P. (EPD) I will lead with the statement that this energy MLP is a very attractive, long-term investment prospect. It may be easier to skip the reading and just go buy some shares. However, if you like to know some information about a company before investing, read on.
Enterprise Product Partners is the largest energy MLP company. The company currently owns over 50,000 miles of pipeline, 190 million barrels of energy product storage, 24 natural gas processing plants, 20 NGL and propylene fractionators, six offshore hub platforms and natural gas liquids - NGL - import/export terminals. The company generates almost 60% of annual earnings from NGL pipelines and processing. Other major earnings sources include dry gas pipelines and services, refined energy product and petrochemical pipelines and services and crude oil pipelines. EPD has a market cap of $44.5 billion, nearly double the next largest MLP, Kinder Morgan Energy Partners L.P. (KMP).
As an investment, Enterprise Product Partners has paid out a very attractive stream of dividends. Through the 2012 first quarter, the quarterly dividend rate has been increased every quarter for 31 consecutive quarters. The year-over-year dividends have been increased at a 5% rate and the EPD shares currently yield 5.0%. Enterprise Product Partners is one of just a few MLP stocks which does not pay incentive distribution rights to the general partner. This feature leaves more cash available for partnership distributions or capital expansion.
With its network of pipelines and processing facilities, Enterprise Product Partners is sitting in the middle of the U.S. energy renaissance. The discoveries and production of natural gas, NGLs and crude oil from shale energy deposits ranging from Texas to Canada has put the U.S. energy industry on a path toward becoming energy self-sufficient and the availability of NGL feedstocks is fueling a boom in petrochemical production. Enterprise Product Partners just restarted the flow reversal of the Seaway Crude Oil Pipeline. The pipeline - a joint venture between Enterprise Product Partners and Enbridge Inc. (ENB) - was delivering imported crude oil from the U.S. Gulf Coast to Cushing, Oklahoma. Now oil produced in the U.S. will flow south in the pipeline to the Gulf Coast refineries. In phase two, the two companies will build a parallel pipeline to double the amount of crude oil flowing south.
Over the last eight years while Enterprise Product Partners has been steadily increasing the quarterly distributions, the EDP share price has increased by 124%. Over the same time frame, the S&P 500 has gained 17%. The steadily increasing distribution rate from EDP should pull up the share price, resulting in annual double-digit gains - dividends plus appreciation.