High-Yield Investing: Why Enterprise Products Partners Stands Out
When it comes to investing, there’s no such thing as a perfect opportunity. Every investment comes with its pros and cons. However, if you’re looking for a high-yield investment, Enterprise Products Partners (NYSE: EPD) is still an attractive option despite some negatives.
A Yield That Stands Out
The S&P 500’s dividend yield averages around 1.2%, while the average energy stock yields about 3.3%. In contrast, Enterprise Products Partners’ distribution yield is a impressive 6.3%. While the yield isn’t as high as it was a few years ago, it’s still an attractive option for income investors.
A Growing Distribution Rate
Despite the unit price rally over the past year, Enterprise’s distribution rate has risen by around 40% over the past three years. This is partly due to the unit price finally surpassing its pre-pandemic level. While the yield may not be as high as it once was, it’s still an attractive option for those looking to maximize their portfolio’s income.
A Strong Financial Position
Enterprise boasts an investment-grade-rated balance sheet, having increased its distribution annually for 26 consecutive years. Its distributable cash flow covers the distribution by a generous 1.7x, making the distribution extremely solid. The company’s financially conservative approach may mean slow and steady growth, but it also ensures a stable income stream.
Clean Energy Risks and Opportunities
One of the biggest concerns surrounding Enterprise is the growth of clean energy. While this is a real threat, it will likely play out over decades. Demand for oil and natural gas, where Enterprise has a heavy focus, is likely to remain robust for the foreseeable future. In fact, history suggests that new energy sources tend to be additive, rather than replacing existing ones.
A Desirable Income Investment
While Enterprise may not be as attractive an income investment as it was a few years ago, it still offers a highly attractive yield compared to other options. If you’re looking to generate as much income as possible from your portfolio, this MLP should be on your shortlist.
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