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Enterprise Products Partners (NYSE:EPD) has once again increased its cash distribution, continuing its long-standing history of payout growth. The master limited partnership (MLP) has raised its distribution twice this year, marking a 5% increase over the past 12 months. This year also marks the 26th consecutive year of distribution growth, showcasing the company’s commitment to delivering value to its stakeholders.
The MLP's current distribution yields over 7%, reflecting its strong position in maintaining and growing its payouts.
Consistent Growth Continues
Enterprise Products Partners recently paid its latest quarterly distribution of $0.525 per unit ($2.10 annualized), which is approximately 2% higher than the previous quarter and 5% above the rate from a year ago. The company has consistently increased its payout every year since its initial public offering (IPO) 26 years ago.
Several factors contribute to this consistent growth. First, the company generates stable cash flow due to its diversified portfolio of midstream assets, including pipelines, processing plants, storage terminals, export complexes, and petrochemical plants. Most of these assets generate fee-based cash flows, supported by long-term contracts or government-regulated rate structures.
Additionally, Enterprise Products Partners maintains a conservative payout ratio. Over the past 12 months, the company produced $8.4 billion in adjusted cash flow from operations and distributed $4.4 billion, resulting in a payout ratio of about 52%. This approach allows the MLP to retain significant cash flow, which it uses to fund expansion projects, repurchase units, and maintain a strong balance sheet.
Speaking of its balance sheet, Enterprise Products Partners stands out in the midstream sector with its A-rated credit and low 3.0 times leverage ratio. This strong financial position enables the company to borrow funds at favorable rates and terms, which it uses to finance its operations and growth initiatives. For instance, the company recently secured $1.1 billion in 10-year notes at a 4.95% rate and $1.4 billion in 30-year notes at a 5.55% rate, which will help refinance maturing debt and support expansion projects.
Future Growth Prospects
Enterprise Products Partners is well-positioned to continue growing its distribution payments in the coming years. The company's large backlog of expansion projects, currently valued at $6.7 billion, is set to come online through 2026. These projects include new processing plants, pipeline expansions, and increased export capacity. The company’s commercially secured projects provide clear visibility into future cash flow growth and its ongoing ability to return more cash to its stakeholders.
