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Key Points

• Enterprise Products Partners is a midstream master limited partnership (MLP).

• The MLP charges fees for the use of its assets, producing reliable cash flows through the energy cycle.

• The last time Enterprise traded around $36, the yield was below 4%, which won't be the case this time around.

• 10 stocks we like better than Enterprise Products Partners ›

Enterprise Products Partners (NYSE: EPD) is trading a little under $32 per share and offering a distribution yield of nearly 6.8%. That's attractive when you consider that the S&P 500 index (SNPINDEX: ^GSPC) only offers 1.3%, and the average energy stock just 3.6%.

Does that make Enterprise Products Partners a buy? And why is the $36 price point so important?

What does Enterprise Products Partners do?

Before looking at Enterprise's yield and unit price, it is important to understand the business behind both of those first two numbers. Enterprise is a large North American midstream company. That means it owns things like energy pipelines and storage, processing, and transportation assets. These are large and expensive infrastructure assets. The energy sector couldn't operate without them.

Unlike oil and gas producers and chemical and refining companies, volatile commodity prices aren't the key determinant of Enterprise's financial success. That's because it charges fees for moving commodities through its system; the price of what is being transported isn't all that important -- demand is.

And demand tends to be robust even when energy prices are low because oil and natural gas are so important. Thus, Enterprise tends to produce reliable cash flows to back its large distribution.

Over time, Enterprise grows by expanding its portfolio of assets (via ground-up construction or acquisition) and by increasing the fees it charges its customers. The trend has historically been a slow and steady rise in revenue over time. And that has resulted in a slow and steady increase in the distribution over time.

Enterprise's distribution has grown every year for the past 26 years. That's an impressive amount of consistency given the inherent volatility of the energy sector. An investment-grade balance sheet and generally conservative management style have helped a lot over the years.

Should you buy Enterprise below $36?

What is so important about $36? That price is near the historical high point of Enterprise's stock, last seen in the 2014 to 2015 period. So, in essence, the question here is really, "Should investors buy this midstream Master Limited Partnership (MLP) as it closes back in on its all-time highs?"