How Reliable is Enterprise Products' Yield for Income Investors?

Enterprise Products Partners LP EPD is a major midstream energy player with a pipeline network spanning more than 50,000 miles, transporting crude oil, natural gas, natural gas liquids, refined products and more. The partnership also has a liquid storage capacity of more than 300 million barrels. From these midstream assets, EPD earns stable fee-based revenues, generating wealth for its unitholders.

Additionally, EPD has $5.1 billion worth of key capital projects currently under construction. This secures additional cash flows, further strengthening EPD’s position in rewarding capital to unitholders. To highlight Enterprise Products’ strong focus on rewarding unitholders’ wealth, the partnership has returned $61 billion since its IPO. Notably, for 27 consecutive years, the partnership has successfully increased its distributions.

Currently, Enterprise Products’ distribution yield is 6.8%, which is well above the energy sector’s 3.7% yield. However, the yield of the industry’s composite stocks is slightly higher at 6.99%. Thus, compared to the energy sector as a whole, EPD’s distribution yield is lucrative. To add to it, investors who will continue to hold the stock can expect a safe return as the partnership’s business model is backed by stable fee-based revenues and project backlogs.

KMI & ENB’s Yields are Lower Than EPD

In the midstream space, Kinder Morgan, Inc. KMI and EnbridgeInc. ENB are two major players that also generate stable fee-based revenues from their midstream assets. Both KMI and ENB are strongly focused on returning capital to shareholders.

But EPD’s yield is superior to both Kinder Morgan and Enbridge. While Kinder Morgan’s dividend yield is 4.3%, Enbridge’s yield is 5.7%.

EPD’s Price Performance, Valuation & Estimates

Units of Enterprise Products have soared 10.6% over the past year against a 4.1% decline of the composite stocks belonging to the industry.

From a valuation standpoint, EPD trades at a trailing 12-month enterprise value to EBITDA (EV/EBITDA) of 10.50X. This is below the broader industry average of 10.53X.

The Zacks Consensus Estimate for EPD’s 2025 earnings has seen downward revisions over the past 30 days.

Enterprise Products currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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