3 Reasons to Buy Enterprise Products Partners Stock Like There’s No Tomorrow

Pipeline company Enterprise Products Partners (NYSE: EPD) has had a strong year, with its stock price up about 30% as of this writing, while also paying out a very attractive distribution. Despite its solid performance this year, there is good reason to believe that the stock is well-positioned to continue to be a strong performer in the years ahead.

Let’s look at three reasons why investors should consider buying Enterprise Products Partners’ stock at current levels.

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The first thing to note when looking at Enterprise as a long-term investment is that the master limited partnership (MLP) has an unparalleled track record of consistency in the midstream energy space.

The company has raised its distribution for 26 consecutive years despite having to deal with a number of difficult periods for the energy market and economy during that span. Enterprise’s consistency stems from its largely fee-based model, where the company only takes on minimal commodity or spread risk. Approximately 90% of its contracts also have inflation escalators. Meanwhile, it has historically been conservative with its leverage, distribution coverage ratio, and growth capital expenditure (capex) spending.

Currently, the stock carries a forward yield of about 6.2%. Its distribution, meanwhile, is well covered by its distributable cash flow, which is operating cash flow minus maintenance capex. Last quarter, Enterprise Products Partners had a distribution coverage ratio of 1.7.

The company’s balance sheet also remains in good shape, with net debt (adjusted for equity credit in junior subordinated notes) standing at three times adjusted EBITDA. It has an investment-grade rating on its debt and its weighted average cost of debt is only 4.7%, which is attractive in the current high interest rate environment.

This all sets the company up to continue nicely increasing its distribution moving forward.

Image source: Getty Images.

In addition to its consistent track record,…

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