Enterprise Products Partners
Dividend investors rejoice -- we're also betting on shares of an income focused MLP this week. Enterprise Products Partners (EPD) is a Houston-based master limited partnership was essentially designed to generate tax-efficient dividend income for investors, paying out the proceeds of its natural gas pipelines and processing facilities to shareholders in the form of a 4.9% yield.
EPD has benefited from increased natural gas production here at home, even if prices have been on the decline. Because EPD's main business is midstream, it's able to improve its performance by moving more gas throughput, even if natgas prices are continuing to get hammered lower. Crude oil pipelines are becoming an increasingly important part of EPD's asset base, providing a nice complement to the firm's natgas business. As energy consumers actively switch between the two fuels for their needs, the ability to transport both oil and gas should help ensure that EPD's financial performance doesn't hinge on a single source.
Size has advantages in the MLP business. Because this class of firms has to pay out the vast majority of its income to shareholders to hang onto its tax-free status, master limited partnerships often lack the liquidity that we'd see at comparable corporations. Not so with EPD -- the firm currently sports close to a billion dollars in cash and investments, and it's got plenty of dry powder to draw from in the capital markets, where size also matters. Income investors could do worse than this energy name.
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