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

Steven Fiorillo profile picture
Steven Fiorillo


  • 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.
Storage tank of liquid chemical and petrochemical product tank, Aerial view at night. Hong Kong
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

This article was written by

Steven Fiorillo profile picture
I am focused on growth and dividend income. My personal strategy revolves around setting myself up for an easy retirement by creating a portfolio which focuses on compounding dividend income and growth. Dividends are an intricate part of my strategy as I have structured my portfolio to have monthly dividend income which grows through dividend reinvestment and yearly increases. Feel free to reach out to me on Seeking Alpha or https://dividendincomestreams.substack.com/

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

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (121)

This article replaced "Why I Sold EPD." It's enough to drive one wacky.
@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.
@Meg's Dad I would happily take 26 by year end. 8% yield and 15% capital gain.
@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.
@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.
Waiting for market to love epd as much as I do. Guess I will sit back and collect my 30k per quarter. Ho humm
@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 profile picture
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. 😀
@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.
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 profile picture
@D. Rockefeller "Virtue Signaling" is an effective marketing ploy to sheer the sheeple.
DougBodde profile picture
Fly big E fly!!
Cuip99 profile picture
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 profile picture
@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.
@Phil in OKC we humans definitely affect the climate, but long EPD anyway!!!🚀🚀
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 profile picture
@LongviewInvestor Thanks for reading and commenting I am glad you enjoyed it
scottiebumich profile picture
And what are you thoughts vs. Enbridge?
Steven Fiorillo profile picture
@scottiebumich Thanks for reading and commenting. I love ENB!!
ChuckXX profile picture
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 profile picture
@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."
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!
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.
@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
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 profile picture
@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.
@villanema the return is the distribution not the share price

However, if wanted strictly returns there are other higher yielding assets. As I understand the investment process capital gains are happily and gratefully naccepted.
and yet the stock falls as the market skyrockets. epd my largest holding but the stock seems to be dead
@Meg's Dad it deserves a place in the portfolio but largest holding?
Well said!
Steven Fiorillo profile picture
@Sanibelgoldsmith Thanks for reading and commenting I am glad you enjoyed it
Good Article
Am bookmarking
Thank You
Steven Fiorillo profile picture
@bearcub1936 Thanks for reading and commenting I am glad you enjoyed it
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.
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 profile picture
@Mirage57 Thanks for reading and commenting I am glad you enjoyed it
EPD management is experienced, conservative and savvy. Lots to like here.
Steven Fiorillo profile picture
@mikef413 Thanks for reading and commenting I am glad you enjoyed it
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.
Steven Fiorillo profile picture
@gret Thanks for reading and commenting I am glad you enjoyed it
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