Enterprise Products Partners: This 8% Yielding Best In Class Midstream Is Still On Sale As U.S. LNG Exports Increase

Summary

• EPD has one of the best dividend/distributions an income investor can find with 22 years of consecutive increases, a yield that exceeds 8% and a 1.6x DCF coverage ratio.
• EPD has strong fundamentals as it returned $38.8 billion to shareholders since 1998 and increased its distribution through the financial crisis, oil price crisis and COVID-19 pandemic.
• EPD finished 2020 in a position of strength as their net income was in the billions and margins remained intact.
• I believe EPD will trade in the high $20s by end of 2021 and there is an 8% distribution to go along with the unit appreciation.

Photo by CHUNYIP WONG/E+ via Getty Images

On 1/10/21 I wrote an article on Enterprise Products Partners (NYSE:EPD) indicating that there was significant unit appreciation left in its recovery. Since that article units have increased by 4.65% trailing the 5.70% the S&P 500 has appreciated by. I have been long on EPD and others in the sector for some time and believe EPD is still a buy. EPD closed on 4/1/21 at $22.27 per unit with a distribution yield of 8.08% as it pays $1.80 per unit. From the beginning of 2019 to the start of the pandemic EPD traded in the mid to upper $20 range on a consistent basis. 2020 was one of the worst business environments EPD had to endure yet their net cash flow from operating activities of $5.9 billion, free cash flow of $2.7 billion and distributable cash flow of $6.4 billion showed incredible stability.

Throughout the pandemic when energy companies were in their darkest hour EPD maintained its distribution while providing unitholders with another increase in 2021 maintaining their 22 consecutive years of distribution increases. Recently President Biden unveiled an infrastructure plan in excess of $2 trillion which will allocate:

• $621 billion into transportation infrastructure such as bridges, roads, public transit, ports, airports and electric vehicle development
• $400 billion to care for elderly and disabled Americans
• $300 billion into improving drinking-water infrastructure, expanding broadband access and upgrading electric grids
• $300 billion into building and retrofitting affordable housing, along with constructing and upgrading schools
• $580 billion in American manufacturing, research and development and job training efforts

The scale of this infrastructure bill is going to require a massive amount of energy in the form of fossil fuels which is spectacular for EPD. EPD is also going to benefit from the increasing global demand of liquified natural gas (LNG). EPD operates over 50,000 miles of NGL, crude, natural has, petrochemical and refined products pipelines with massive storage capacity, robust processing facilities and 19 deep-water docks. Based on EPD’s performance in 2020 I believe the combination of life getting back to normal, the infrastructure plan and LNG exports EPD will deliver a solid 2021 and units will continue their road to recovery. I think units are still undervalued by 25% and my 2021 target is at least $28 per unit.

(Source: Enterprise Products Partners)

Through a pandemic which shut the country down and drastically changed life EPD still delivered a strong 2021

Sometimes the headlines can be deceiving and not every energy company got decimated throughout this pandemic. EPD stood their ground and in my opinion delivered a respectable 2020 given the operating environment. Revenue decreased by $5.59 billion (-17.05%) from $32.79 to $27.20 billion in 2020. On the surface that’s a drastic reduction but a decrease in revenue had to be expected. The interesting part is what EPD’s gross income, net income and their ratios looked like. EPD managed to keep their gross profit inline with 2019 as it only declined by $63.70 million (-1.10%) to $5.71 billion. EPD also produced $3.78 billion in net income which was a decline of $815.7 million (-17.77%). Given the dramatic decrease in revenue EPD’s management team persevered in the face of adversity as they still generated billions in pure profit and kept their gross income inline.

EPD’s ratios were surprisingly impressive for 2020. EPD’s gross profit margin was 21.01% ($5.7147 / $27.1997) which was the largest it's been in the past decade. In 2019 EPD’s gross profit margin was 17.62% ($5.7784 / $32.7892). EPD also had an impressive net income conversion ratio. In 2019 EPD converted 14% ($4.5913 / $32.7892) of their revenue to net income and in 2020 EPD converted 13.88% ($3.7756 / $27.1997). This is an indication of strong management which can absolutely do more with less.

(Source: Steven Fiorillo) (Data Source: Seeking Alpha)

One of the things to remember about EPD is they throw off a tremendous amount of cash to their unit holders. This isn’t an investment where share appreciation is the end all be all. Many people are invested in EPD because of its income producing capabilities. In 2020 EPD generated net income attributable to common unitholders of $3.8 billion. Net cash flow provided by operating activities came in at $5.9 billion. Free cash flow increased 8% to $2.7 billion in 2020 from $2.5 billion for 2019. Distributable cash flow (DCF) was $6.4 billion in 2020 compared to $6.6 billion in 2019. EPD’s DCF in 2020 was large enough to create a 1.6x coverage ratio over its distributions and EPD was able to retain $2.5 billion of its DCF to reinvest after its distributions were paid.

(Source: Enterprise Products Partners)

EPD’s distribution remained intact and unitholders received their 22^nd consecutive annual increase in 2021

There are many companies that pay a dividend or distribution but there aren’t many that can compete with EPD. In 2020 the S&P 500 dividend yield was 1.58% and the dividend aristocrats had an average yield of 2.9%. It's not uncommon to see dividend/distribution cuts when times are bad and quite a few high yielding Energy companies & REITs did exactly that in 2020. Unitholders of EPD faced a different reality as an increase was provided in 2020 then again in 2021. Some people say sound the alarm when the yield is as high as EPD’s but I say look at the metrics. EPD’s distribution is solid and approaching dividend aristocrat status.

There is nothing to complain about or not to like about EPD’s distribution. EPD’s $1.80 per unit distribution has a yield of 8.1% without a single blemish. EPD has returned $38.8 billion back to unitholders in distributions and buybacks since 1998. Over the past two decades EPD didn’t just maintain but they increased their distribution throughout the financial crisis in 2007 – 2008, the oil price crisis 2014 – 2016 and through COVID 2020 – Current. Since 2004 EPD’s operational & DCF coverage ratio has exceeded 1x.

EPD has a best in class distribution that can rival any companies. By investing in EPD you are getting an 8.1% yield, 22 consecutive years of dividend growth, a 1.6x coverage ratio and a track record of returning capital to unitholders. If you’re an income investor there are many choices in the market but not many provide a dividend / distribution that can compare to EPD’s. In three years EPD will be crowned a dividend aristocrat and holders of EPD will enjoy three more years of distribution increases along the way.

(Source: Enterprise Products Partners)

I continue to believe LNG will be the fuel of the future and as the U.S. exports continue to increase EPD will reap the benefits

The EIA is predicting that the global energy demand will increase by 50% over the next three decades. An increase in energy demand of 50% may seem drastic but in the year 2057 there will be an additional 2.2 billion people in the global population so it makes sense. The EIA is projecting that in their reference case the United States is both an importer and an exporter of petroleum liquids as they import mostly heavy crude and export products such as gasoline and diesel. The EIA’s reference case projects that the U.S will see high levels of exports for petroleum and other liquid exports through 2050 to support the global demand. The EIA is also projecting that natural gas consumption will grow from 2020 through 2050 in both domestic industrial use and exports. The largest growth in natural gas exports will be seen from 2020 – 2030 as it increases by a rate of 4x then a gradual increase to the 5x level in 2050 based off of 2020 export levels.

(Source: EIA)

U.S Natural gas and LNG exports have increased dramatically over the past 6 years. From 2015 – 2020 the total U.S natural gas exports increased 296% from 1,783,512mcf to 5,281,017mcf and LNG exports increased by 8,421% from 28,381mcf to 2,389,838. In 2020 LNG exports reached a new record of 2.39 trillion cubic feet which is a 32% YoY increase as LNG was exported from the U.S to 37 countries. In 2020 U.S. LNG exports to Asia increased by 67U.S. LNG exports to Europe averaged 2.5 Bcf/d which was an increase of 0.6Bcf/d from 2019. Based on the prior data from the EIA and their future predictions I believe their use case about U.S exports will come to fruition.

(Source: Steven Fiorillo) (Data Source: EIA)

I am bullish on exports for two reasons. The first reason is for an export to occur it needs to be transported, processed and stored first. The second reason is midstream companies such as EPD will see additional fuels running through their system and collect the fees associated with the demand. EPD is one of the best situated companies to capitalize on what I believe will be a growing trend. In 2020 EPD’s operations saw:

• NGL pipeline transportation volumes 3,589Mbpd
• NGL marine terminal volumes 722Mbpd
• NGL fractionation volumes 1,359Mbpd
• Fee-based natural gas processing volumes 4,285MMcf/d
• Crude oil pipeline transportation volumes 2,166Mbpd
• Crude oil marine terminal volumes 724Mbpd
• Natural gas pipeline transportation volumes 13,421BBtus/d
• Propylene production volumes 89Mbpd
• Butane isomerization volumes 96Mbpd
• Pipeline transportation volumes, primarily refined products 802Mbpd
• Refined products and petrochemicals marine terminal volumes 262Mbpd

These fossil fuels are raw materials which are critical to everyday life. EPD earns fees throughout their entire transportation process. When you think about companies that have a moat around their business EPD has to be in the conversation. This isn’t an industry you can just build from the ground up anymore. There is a reason Warren Buffett bought Dominion’s (D) natural gas assets and it's simply easier to acquire existing infrastructure than going through a rough permitting process and dealing with all of the uncertainties. With 19 deepwater docks and a massive infrastructure EPD is in prime position to see increased revenues from the growing energy demand.

(Source: Enterprise Products Partners)

Why I am not worried about green energy replacing fossil fuels over the next 2 decades

I am putting a disclaimer here, I am not against clean energy, renewable resources, or renewable energy increasing its position in the global energy mix. This section isn’t meant to be political and isn’t a political statement. Please do not turn this into a political debate in the comments and I will not respond to anything political. This section is my personal point of view based on the current facts. I am invested in Star Peak Energy Transition Corp. (STPK) which is a clean energy company and wrote an article to outline my thesis on STPK.

Recently President Joe Biden signed an executive order to rejoin the Paris Climate Agreement and he has been adamant about achieving a 100% clean energy economy and net-zero emissions by 2050. Recently the newly appointed U.S. Secretary of Energy Jennifer Granholm said “We need to get to 100% clean electricity by 2035.” The current leadership is adamant about 100% renewable as the Democrats in the House of Representatives published a 538-page report named Solving The Climate Crisis which outlined their plan to reach net-zero emissions by 2050 on June 30^th 2020. Recently the Biden Administration announced their taking initial steps toward approving a massive wind farm off the New Jersey coast. This will be part of an effort to generate electricity for more than 10 million homes nationwide by 2030. President Biden has vowed to double offshore wind production by 2030. I absolutely applaud this effort, President Biden made renewable energy one of his platforms and he is delivering. My feelings are that it's incredibly improbable to meet the overall goal of 100% clean electricity by 2035 and net zero by 2050.

(Source: EIA)

Above is a breakdown of which energy sources fuel U.S. electricity. Fossil fuels make up 60.3%, nuclear 19.7% and renewables 19.8%. Within renewables wind accounts for 8.4% and solar 2.3%. In 2020 the U.S. consumed 4,009 billion kWh of electricity, keep in mind this is just electricity and not the total energy demand of the U.S. Wind & solar accounted for 429 billion kWh which is 10.7% of the U.S.’s 2020 electricity generation. If the U.S. demand doesn’t increase from 2020 – 2030 and wind and solar can double their footprint they would account for 858 billion kWh which would account for 21.4% of the U.S electricity generation. The goal of 100% renewable energy generation for electricity is almost improbable by 2035. Just to displace coal renewables need to generate 774 additional billion kWh from where they are today. Wind and solar would need to increase by 180% just to displace coal by 2035 yet the Biden Administration has a “goal” of doubling wind capacity by 2030. For wind and solar to generate 4,009 billion kWh each would need to increase their generation by 941% by 2035. Keep in mind this is without a single kWh increase in the U.S energy demand for electricity.

In the EIA’s latest annual energy report for the U.S. which was released on 3/2/21 it indicates that wind and solar will account for 42% of the electricity generated in 2050. The EIA is also projecting that the amount of energy consumed from wind and solar will increase from roughly 7 quadrillion Btus to 17 quadrillion Btus, which is an increase of 142.86% by 2050. With the global energy demand set to increase by 50% by 2050 led by Asia I don’t see a path to eliminating natural gas, coal and nuclear in the U.S by 2035, 2040 or even 2050. Keep in mind even if the Biden Administration increases its efforts and doubles down or even triples down on their goals you still have market factors to consider. Every part needs to be manufactured and transported. You also need the bodies to install and connect all the turbines and solar panels to the grid. At some point there will be constraints in the supply chain as a maximum capacity will be reached on production and transportation. In addition there is no guarantee that there will be enough people interested in filling the additional positions created by the transition to green energy.

(Source: EIA)

Putting electricity aside as that’s just one component of the energy mix how about the other use cases for fossil fuels? Oil and gas touch our lives indirectly more than you would think as they provide the foundation for many items used on a day-to-day basis. One of the things that’s overlooked by many is that plastic can be defined as polymers of long carbon chains. Two of the cheapest feedstocks to create the building blocks for plastic are crude oil and natural gas. Fossil fuels have an abundance of hydrocarbons which act as building blocks for long polymer molecules.

Oil and gas play a vital role in everything from our agricultural supply chain, to technology, petrochemicals, plastics and many other aspects of our lives. When you combine ethane, propane and butanes into the equation you would be surprised of the direct and indirect areas they touch. These fuels the advancements and quality of life possible. These fuels directly impact electricity, heating, cooking, fuel, petrochemical feedstock and refinery feedstock to name a few. Some of the end use case products which the hydrocarbons from these fuels help to make include fertilizer, paints, food packing, prosthetics, textiles, detergents, antifreeze, electronics, upholstery, lubricants, jet fuel, asphalt, and plastics. Still to this day I don’t see a world without oil, gas and other fossil fuels. I believe renewables will increase their position in the global energy mix and replace coal but how do you make all of the items that make the world function without fossil fuels?

Once again this isn’t political as I am for renewable energy. I am just looking at this logically. The human population is going to continue to increase and were on track to add 2.2 billion people to the population in 2057. We are going to need a lot more of everything from fertilizer to plastic and everything in-between. I am open minded and I am willing to listen and evaluate all points of view on this issue. For anyone who thinks I am incorrect I have the following questions:

• Starting with electricity how do we manufacture, deliver and install enough wind turbines and solar panels to go 100% renewable by 2035 or 2040? It's one thing to just say were going to do it but how long will it take to manufacture enough supply to meet the current demand let alone our growing energy needs? How long is it going to take for the U.S to create enough jobs and provide the proper training in these fields?
• If the end goal is to replace all fossil fuels what will the world use to make all the products that hydrocarbons touch?

The reason I am asking is I have never read a clear concise plan that makes sense. I am all for the evolution of the global energy mix but I want to understand how it's going to happen before I change my stance on fossil fuels. Until then I am a firm believer that companies such as EPD will play a critical role in transporting the fuels that make the world function.

Conclusion

I think EPD is one of the best midstream operators you can invest in. If you’re an income investor EPD should be on your radar. With 22 years of consecutive distribution increases, a yield that exceeds 8% and a 1.6x DCF coverage ratio those distributions will be flowing into your brokerage accounts for years to come. I believe EPD is undervalued and will continue making its way back to the high $20s by the end of 2021. Until I see evidence that fossil fuels won’t be needed in the next 2-3 decades my stance isn’t changing and EPD is a buy in my eyes.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Disclaimer: I am not an investment advisor or professional. This article is my own personal opinion and is not meant to be a recommendation of the purchase or sale of stock. Investors should conduct their own research before investing to see if the companies discussed in this article fits into their portfolio parameters

Comments

[SomethingForEveryone]

This article replaced "Why I Sold EPD." It's enough to drive one wacky.

[breaking even]

@cardinal933. well if you own more than I do I shall cheer for you on a daily basis. I personally am not calling for $33 but many top firms are calling $28 to $33 by year end.

[The Cardinal]

@Meg's Dad I would happily take 26 by year end. 8% yield and 15% capital gain.

[breaking even]

@cardinal933. well while I love the stock and the divy if epd hits 30+ by year end I might want to grabs a few hundred thousand long term capital gain on 67000 shares. or more since some upgrades recently came out as much as 33 by year end.

[The Cardinal]

@Meg's Dad - well OK, if it goes above 30 by year end, sure I hear you. But the chances of a 30%+ price appreciation in 8 months is less than slim to none. But we can dream. I own more of it than you do by the way.

[breaking even]

Waiting for market to love epd as much as I do. Guess I will sit back and collect my 30k per quarter. Ho humm

[The Cardinal]

@Meg's Dad why do you care about the short term price if you are owning it for the distribution (as I am)? I guess it makes one feel better and smarter, but to me it doesn't really matter what it does in the short term.

[houtex]

@cardinal933
I’ve thought about that question because it comes up a lot. I think the answer is that the unit price is the market’s collective view on the sustainability in, or likely growth of, the distribution. It’s not an input, but an output, a way to combine millions of opinions (some smart, some not) on just how strong the distribution outlook is.
It’s like a CAT scan. Why do you care if the CAT scan shows a tumor? The tumor is there regardless of what the scan says. But I’d rather still have it come back negative. 😀

[The Cardinal]

@houtex - uhhhhhhh I don't even understand you second paragraph. I say that as someone who undergoes a CT scan every 6 months because I am a cancer survivor. I can tell you - I CARE. If it comes back positive, I'm a dead man within a year. If it doesn't, then I have a reprieve. Your metaphor makes no sense to me.

[D. Rockefeller]

I think most of the "problem" is extracting oil and gas has become harder and more expensive and the "agendas" promoted in the main media and by politicians are just political slogans for the masses rather than try and intelligently try and explain or debate the actual issue. That has never worked in America as GW Bush found out. You dumb is down and appeal to emotions and the lowest common denominator what gets you elected.
One aspect is really weird using wood pellets mostly from tree farms in the US south which end up in the UK's largest electricity plant! Logically you might wonder if burning wood might not a step backwards? Is the oil situation really that bad that we have to burn wood then claim it's "Green" because trees can be replanted? Cutting down trees in Georgia then trucking them to a pelletizing plant using Semi's and heavy fossil fuel powered machines then loading trains carrying it to the coastal US then onto huge ships powered with bunker fuel then loading it onto trains to the largest UK electric plant using giant steam turbines??? Well that's so Prince Charles and his global reset Davos elites can push the illusion of saving the planet using battery EV's around the UK. A lot of BS going around these days and the level of it also makes me wonder about actual Saudi Reserves, how depleted the North Sea really is, Kuwait, OPEC in general and wonder perhaps if Maduro isn't actually employed by the CIA to hold back Venezuelan production for later use.
Nothing is "free" and comes with costs and needs energy but it's Net energy which matters but Saudi Reserves are a state secret and private companies also have kept much secret sou you just have to make your best intelligent "guesstimates".
I'm planing on keeping my 2007 Chevy Equinox 3.4 Litre V6 4 wheel drive as long as I can here in MN as all batteries lose half their stated range in cold weather and lose their charge like my I Phone even just sitting there.
Question is how actually serious is our energy situation??? I see hydrogen in various forms as the best solution in the future like using Ammonia to transport it or fuel cargo ships etc. I think we can all agree on the fact there is no global warming/CO-2 problem or Climate Change etc. BS but if CO-2 levels did drop to 180ppm? Well all life on planet earth would die. Methane might heat the atmosphere more but we've had several Ice Ages already and could have more as the Earth gradually cools. Politicians do help with all their "hot air" I suppose. T Boone Pickens talked about us having round 100 years worth of Natural Gas while we morph into my guess would be more hydrogen.

[Phil in OKC]

@D. Rockefeller "Virtue Signaling" is an effective marketing ploy to sheer the sheeple.

[DougBodde]

Fly big E fly!!

[Cuip99]

Yes, renewable energy being capable of replacing exisiting fossil fuels is a pipe dream. Even with massive improvement of effeciencies, it still will not happen. Ergo I have invested in SO, DUK, CWEN and have some FUTY shares. Not worried about them continuing to generate good dividends.

[Phil in OKC]

@Cuip99 If only the mind numbed robots in the Green Energy Religion could come to grips with the idea of supporting all forms of energy, and let the market decide which is best at any certain time. Instead they direct their energy to destroying the jobs and livelihoods of hard working pipeliners, and other oil and gas industry employees, all because of the false science that maintains mankind can affect climate or global warming via our activities. It is truly a mental disorder.

[Stevaaayyy]

@Phil in OKC we humans definitely affect the climate, but long EPD anyway!!!🚀🚀

[LongviewInvestor]

Well written article, you put a lot of work into this. I'm also long on EPD.

In the late 70's/ early 80's, there were articles stating for fact that the world would be out of oil by the early 2000's. In the early 90's, it was the "paperless office" which was inevitable. So here we are 30-40 years later and I still see a lot of gas stations and, albeit, a smaller but nonetheless sizable amount of paper in every office. Will it eventually change? Yes, absolutely, but like driverless cars, it will take a lot more time than people expect. .

While social change can occur rather quickly, infrastructure or physical driven change has economic factors tied to it that often slows things down.

[Steven Fiorillo]

@LongviewInvestor Thanks for reading and commenting I am glad you enjoyed it

[scottiebumich]

And what are you thoughts vs. Enbridge?

[Steven Fiorillo]

@scottiebumich Thanks for reading and commenting. I love ENB!!

[ChuckXX]

I own 9,000 shares of EPD. Will not be adding more. Rather interesting that the author gives us a sermon on how he loves the company and then inserts his love for Bidens energy plan which of course over time will destroy the Oil/Nat Gas Industry.

[Steven Fiorillo]

@ChuckXX Thanks for reading and commenting. I am not sure how you can get that I love Biden's energy plan from what I wrote? I am pro green energy but was crystal clear that oil and gas will play an important role in not only the domestic but global energy mix for decades to come and I don't see a path to eliminating oil and gas anytime soon. I also asked specific questions on how we get to a future without oil and gas and said:

"I am all for the evolution of the global energy mix but I want to understand how it's going to happen before I change my stance on fossil fuels. Until then I am a firm believer that companies such as EPD will play a critical role in transporting the fuels that make the world function."

[Paul1082]

If the Biden administration succeeds in raising US corporate income tax rates back up to 28%, MLP structures will become even more valuable because of the increased tax savings. Long EPD!

[User 51751095]

It is not a bad analysis. But the core of the EPD strategy is natural gas liquids processing. In this regard, LNG exported by ship must be bone dry of ethane.
Also, EPD has focused on the export of ngl purity products.

Our chemical and refining industry is still badly disrupted by the intermittent windmill caused electrical grid failure. The primary corruption was the price-only market resulting in the closure of firm capacity reserve. Also excess natural gas generation relative to solid fuel diversification.

This brings me to the critical natural gas shortages inflicted on Asia by the command and control power generation industry of the communists. Resulting in massive price shocks for lng in Asia.

Natural gas is cleaner. But it is also low density. Making dependence on just-in-time ship delivery dangerous. Despite the world's largest lng tank capacity, Japan had to resort to burning diesel.

In any case, EPD is centered in our value-added chemicals and refining industry. As our discounted ngl feedstock advantage can not be overcome by Naptha-based world competition. Especially the communists.

Enterprise Hydrocarbons Terminal

The Enterprise Hydrocarbons Terminal (“EHT”) is located on the Houston Ship Channel and provides terminaling services to exporters, marketers, distributors, chemical companies and major integrated oil companies. EHT has extensive waterfront access consisting of seven deep-water ship docks and one barge dock. The terminal can accommodate vessels with up to a 45 foot draft, including Suezmax tankers, which are the largest tankers that can navigate the Houston Ship Channel. We believe that our location on the Houston Ship Channel enables us to handle larger vessels than our competitors because our waterfront has fewer draft and beam (width) restrictions. The size and structure of our waterfront allows us to receive and unload products for our customers and provide terminaling and dock services"

Given the massive discounts on feedstocks, EPD provides supply customers with access to higher prices in world markets. Even after very expensive ship-borne carry.

As for investors frustrated with EPDs total return performance? We just went through the perfect storm of a communist plague and Putin fully disrupting the oil complex. Then like it or not the lawless Joe Dotard regime shutting down a pipeline. Hard to imagine a more perfect storm. But we must also add intermittent corruption as the primary cause of the Texas grid failure. With it our petrochemical complex.

Despite it all, there was little danger of EPD being forced to reduce their distribution. Morningstar says EPD plays chess while others in this space play checkers. True enough.

But a political regime that claims America can run on intermittent is delusional beyond all reason. That sort of derangement is dangerous. Dangerous far beyond EPD. As is this belief grids can be stable on intermittent and natural gas alone. No, no grids can not.

Still, there is a great deal at this price with EPD. They will pay the distribution. Further, if Joe's actions further retard our real energy industry? The ROI on buying in equity is stunning.

Saudi Arabia has taken advantage of Joe's antics to push the price far above what the analysts thought was possible. We have not seen a jump in Permian oil production and the rich natural gas which feeds the EPD core business model.

Real shame Joe somehow took the election. But EPD is one of the limited number of equities at value rather than liquidity bubble valuation.

[goldwatcher]

@Mad Who "real shame Joe somehow took the election"...He took the election because the Republicans were lead by a socialpath and they continue to attrack the crazies like taylor-green etc. I am a Republican and longing for a leader that can bring back the parties true principals. Thank-you for your very informative post. Long EPD

[villanema]

EPD is touted as a great stock by almost all SA analysts and many other extremely learned pundits. However, it does not grow. Am I missing something. Long and frustrated. Incidentally I do feel positive regarding management.

[Phil in OKC]

@villanema Concentrate on the steady and growing dividend. EPD is one of the top two largest (well moated) pipeline companies in the U.S. It is a safe investment, as equities go.

[mikef413]

@villanema the return is the distribution not the share price

[villanema]

@mikef413

However, if wanted strictly returns there are other higher yielding assets. As I understand the investment process capital gains are happily and gratefully naccepted.

[breaking even]

and yet the stock falls as the market skyrockets. epd my largest holding but the stock seems to be dead

[MUGSLEY]

@Meg's Dad it deserves a place in the portfolio but largest holding?

[Sanibelgoldsmith]

Well said!

[Steven Fiorillo]

@Sanibelgoldsmith Thanks for reading and commenting I am glad you enjoyed it

[bearcub1936]

Good Article
Am bookmarking
Thank You

[Steven Fiorillo]

@bearcub1936 Thanks for reading and commenting I am glad you enjoyed it

[Mirage57]

Steven, this is a very good article. I fully agree with you that the President Biden plan is very ambitious and rather unrealistic. We will need fossil fuels in probably increasing quantity for the next X years (definitely not less than 20 years). However, this is not the point that I write this comment here - the point is that fossils are Very UnSexy, and as such will continue to be traded at a discount. I don't see the sentiment changing anytime soon and that means that fossil stock price will be depressed for indefinite time. I have a decent position in EDP but I am not planning to add and will happily collect incoming distributions.

[Texasthumper]

@Mirage57
Your missing the very best point. If epd of other pipeline companies generate net cash gains after distributions and after growth cap ex they can re purchase outstanding units which will drive capital appreciation up on the remaining units.

As an example if epd can spend 20b in next 10 years repurchasing units you basically cut the number of units in half. Which then says the remains units will pay $3.80 in distributions which at 8% yield is a unit price of $47.

That is the basis to invest for both yield and appreciation.

[Steven Fiorillo]

@Mirage57 Thanks for reading and commenting I am glad you enjoyed it

[mikef413]

EPD management is experienced, conservative and savvy. Lots to like here.

[Steven Fiorillo]

@mikef413 Thanks for reading and commenting I am glad you enjoyed it

[The Cardinal]

If EPD could weather 2020 and the prior hydrocarbon pricing collapse as well as it did, it has proven its durability as an income vehicle extremely well. Now that the industry is "harvesting" the cash flow from a decade of capital projects, the distribution is a real SWAN and for those of us who want durable income, EPD is not sexy, but it is ideal. For my part, I recognized this last year and bought a ton of it when it had a yield of around 9.5%, so I have enough income just from EPD to cover my retirement income needs. And that yield will certainly grow in the next decade. It's a comfortable position to be in.

[gret]

Thanks

[Steven Fiorillo]

@gret Thanks for reading and commenting I am glad you enjoyed it