Enterprise Products Partners Offers a 7% Dividend Yield. Is This Stock Worth a Look?
Those looking for quality high-yielding stocks should consider Enterprise Products Partners (NYSE: EPD), an under-the-radar energy stock with a generous dividend yield currently above 7% that has raised its annual dividend for 25 consecutive years.
A basic player with bold dividend returns
Price volatility in natural gas, oil, and fossil fuels has caused some investors to move their money to safer instruments that can offer better near-term stability. Meanwhile, the energy sector has faced a series of challenges, and years of economic turmoil, stronger demand, and higher wholesale prices have meant that many energy retailers now have to sell at inelastic prices.
But this isn't the case for Enterprise Products Partners. The midstream holding company operates as a go-between in the natural gas liquids, crude oil, and petrochemical pipelines and services segments. Instead of being directly involved with extraction and production, Enterprise Products Partners is a storage, processing, and transportation service provider. Because the company is not directly involved with direct-to-customer supply chain operations, it's protected from exterior challenges energy suppliers typically experience.
The company is simply part of the route between the extraction point and the consumer. The company charges energy suppliers a fee for storage, processing, and transportation, which means that even as energy prices fluctuate, it can continue to rely on continuous consumer and commercial energy demand.
Despite volatility in energy markets, the company's strategic positioning enables it to maintain healthy cash flow levels, and the business model has allowed Enterprise Products Partners to sustainably increase its dividend.
The stock currently offers a 7% dividend yield, which is an enticing bonus for investors looking to bolster their long-term portfolio performance. The yield is particularly impressive compared to the S&P 500's 1.3% yield.
Enterprise Products Partners reported a positive first quarter in late April. Net income attributable to common unitholders was $1.5 billion, or $0.66 per unit on a fully diluted basis. The per-unit number is a 5% jump from the year-ago quarter.
First-quarter distributions increased by 5.1% to $0.515 per common unit, or $2.06 for a year. On July 10, the company announced it had declared a second-quarter quarterly cash distribution of $0.525 per unit, or $2.10 per unit on an annualized basis.
Worth a look
In addition to its big yield, Enterprise Products Partners is halfway through a $2 billion unit buyback authorization.
It's unlikely that Enterprise Products Partners will begin cutting its highly attractive distribution in the coming years. Though other corners of the energy sector might be experiencing price volatility, this company has positioned itself as a vendor right in the middle of the supply chain, which provides it and investors with a massive opportunity in the long run.
Put it all together and Enterprise Products Partners is worth digging into.
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Jacob Wolinsky has no position in any of the stocks mentioned. The Motley Fool recommends Enterprise Products Partners. The Motley Fool has a disclosure policy.
Enterprise Products Partners Offers a 7% Dividend Yield. Is This Stock Worth a Look? was originally published by The Motley Fool