onurdongel
Enterprise Products Partners L.P. (NYSE:EPD) managed to make a most shorted list and also a worry about a distribution cut. The anxiety seems to be related to the debt ratio, the ratio of free cash flow paid
Enterprise Products Partners: No Distribution Cut Likely Here
Summary
- Enterprise Products Partners L.P. is unlikely to cut its distribution, given its strong debt rating and history of raising distributions.
- The company's debt level is not a concern, with the highest debt rating in the midstream industry.
- Enterprise Products Partners can borrow to pay distributions if necessary.
- Midstream companies like Enterprise Products Partners benefit from long-term contracts with “take or pay” provisions, ensuring stable revenue.
- Note that a combination of capital needs and distribution requirements did exceed free cash flow. But it is not uncommon to borrow to finance at least part of capital growth projects.
- This idea was discussed in more depth with members of my private investing community, Oil & Gas Value Research. Learn More »
Long Player believes oil and gas is a boom-bust, cyclical industry. It takes patience, and it certainly helps to have experience. He has been focusing on this industry for years. He is a retired CPA, and holds an MBA and MA.
He leads the investing group Oil & Gas Value Research. He looks for under-followed oil companies and out-of-favor midstream companies that offer compelling opportunities. The group includes an active chat room in which Oil & Gas investors discuss recent information and share ideas. Learn more.Analyst’s Disclosure:I/we have a beneficial long position in the shares of EPD either through stock ownership, options, or other derivatives. 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.
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