Latest news with #midstreamEnergy
Yahoo
22-06-2025
- Business
- Yahoo
Prediction: Buying Enterprise Products Partners Today Could Set You Up for Life
Enterprise Products Partners can set investors up with a lifetime of solid and growing passive income. The company is one of the most consistent in the midstream space. Using a DRIP is a great way to set you up for a meaningful income stream when it comes time for retirement. 10 stocks we like better than Enterprise Products Partners › Buying stock in midstream energy giant Enterprise Products Partners (NYSE: EPD) could set you up for life. Now, that doesn't mean the stock is going to skyrocket and make you a millionaire overnight on a modest investment. Instead, what buying Enterprise's stock will give you is a lifetime of solid and growing passive income. Enterprise currently sports an attractive forward yield of 6.9%. But the beauty of Enterprise is that the pipeline management company has also increased its distribution in each of the past 26 years, both in good and bad energy markets. Last quarter, the company increased its quarterly payout by 3.9% year over year to $0.535 per unit. If Enterprise were to increase its distribution by a similar amount moving forward, its distribution would approximately double over the next 20 years. With a payout of nearly $4.50 per share by that time, your "personal yield" on an investment in Enterprise at that time would be a little over 13.6% based on the stock's current levels today. While "personal yield" is not a standard financial term, it is simply the yield you are getting based on your personal cost basis (the stock's current dividend/your cost basis). Now, if Enterprise were to keep raising its distribution at this same pace for the next 30 years, its payout would get to $6.75 per share each year. That would be about a 20% personal yield if you bought the stock today. So if you're between 30 and 40 years old, that would set you up with a nice, very high-yield income stream just as you were entering retirement. Another attractive thing with Enterprise is that it's structured as a master limited partnership (MLP), which means it pays distributions instead of traditional dividends. The key difference is tax treatment. A large portion of these distributions is typically classified as return of capital, which isn't taxed immediately. Instead, it lowers your cost basis in the stock. Once your cost basis hits zero, any additional distributions are taxed as capital gains, and when you sell, you'll pay taxes on the deferred portion of distributions at the ordinary income tax rate, which should be lower when you're retired. The rest of the gains are taxed as capital gains. Because of its preferential tax treatment, many investors also don't take the distribution when they are younger. Instead, they use what is called a DRIP, or dividend reinvestment plan. These are plans offered by companies where they will automatically reinvest your distributions back into the stock at no commission in lieu of a cash payment. Using a DRIP to reinvest your distributions over a couple of decades can turn your initial investment into a significant income stream when it's time to retire and start collecting the payouts. What helps separate Enterprise from other high-yield stocks is its consistency. The company has always taken a conservative approach, which has allowed it to weather any economic or energy market storms. Enterprise owns one of the largest integrated midstream companies in the U.S., and it is particularly strong in the natural gas liquids (NGLs) space. NGLs, which include ethane, propane, butane, isobutane, and natural gasoline, are high-value by-products of natural gas and crude oil production. Ethane is one of the main feedstocks in the petrochemical industry to produce plastics and chemicals, while butane can also be used as a petrochemical feedstock, as well as for heating and cooking. The other three tend to be blended into fuels. There is also a large U.S. export market for both propane and butane, and Enterprise is heavily involved throughout the entire NGL value chain. Meanwhile, the company takes several measures to ensure the predictability of its cash flows. Approximately 85% of its business historically comes from fee-based services that aren't impacted by energy prices or commodity spreads. At the same time, it likes to include take-or-pay provisions in its initial contracts, which assures it gets paid no matter whether customers use its services. It also attaches yearly inflation escalators to its contracts, as well. Additionally, Enterprise has always maintained a conservative balance sheet and robust distribution coverage ratio. Building pipelines and other midstream assets is a capital-intensive business, so midstream companies carry debt. Given the strong cash flows and predictable nature of midstream assets, many companies target leverage -- net debt/adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) -- in the 4x to 4.5x times range. However, Enterprise has always taken a more cautious approach, ending Q1 with leverage of only 3.1 times and an investment-grade credit rating on its debt. Today, the company largely self-funds its growth projects through its cash flows, although it will take on some additional debts to pursue attractive growth projects. At the same time, the company's distribution is well covered by its distributable cash flow, which is its operating cash flow minus maintenance capital expenditures. Last quarter, its coverage ratio was 1.7 times, which gives it ample room to continue to increase its distribution in the years ahead. Overall, Enterprise is a sleep-well-at-night stock that can help set up investors for life, offering solid price appreciation potential to go along with an attractive and rising distribution. Before you buy stock in Enterprise Products Partners, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Enterprise Products Partners wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $664,089!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $881,731!* Now, it's worth noting Stock Advisor's total average return is 994% — a market-crushing outperformance compared to 172% for the S&P 500. Don't miss out on the latest top 10 list, available when you join . See the 10 stocks » *Stock Advisor returns as of June 9, 2025 Geoffrey Seiler has positions in Enterprise Products Partners. The Motley Fool recommends Enterprise Products Partners. The Motley Fool has a disclosure policy. Prediction: Buying Enterprise Products Partners Today Could Set You Up for Life was originally published by The Motley Fool Erreur lors de la récupération des données Connectez-vous pour accéder à votre portefeuille Erreur lors de la récupération des données Erreur lors de la récupération des données Erreur lors de la récupération des données Erreur lors de la récupération des données
Globe and Mail
19-06-2025
- Business
- Globe and Mail
Should Investors Worry About Enterprise Products' 3.1 Leverage Ratio?
Enterprise Products Partners LP EPD reported a consolidated leverage ratio of 3.1 as of March 31, 2025. This means the master limited partnership's net debt (after removing the equity-like portion of hybrid debt and subtracting available cash) is 3.1 times larger than its adjusted EBITDA – a measure of its core earnings from operations. EPD's leverage ratio is thus slightly above the midpoint of its target range of 2.75 to 3.25. This generally signals a strong balance sheet as the partnership has the highest credit rating in the midstream energy space. Thus, Enterprise Products is in a strong position with more flexibility to raise capital in the future at favorable rates. That said, the midstream energy giant is carefully managing its balance sheet. On its first-quarter earnings call, EPD stated that as of the March quarter of this year, 96% of its $31.9 billion in total debt carried a fixed interest rate, which means the interest payments will not increase even if market interest rates rise. The partnership added that its debt portfolio has an average maturity of 18 years, and hence has plenty of time to pay off its debt principal. Although the overall outlook appears strong, investors should continue to monitor whether the partnership can maintain healthy profits to keep its leverage ratio within the target range it has committed to. Do KMI & WMB Have a Strong Balance Sheet? Kinder Morgan KMI and Williams WMB are also leading midstream energy players. Thus, both KMI and WMB require significant capital to invest in and to maintain their midstream assets. Considering the total debt-to-capitalization ratio, WMB has significantly more exposure to debt capital than the composite players belonging to the industry. WMB has a debt-to-capitalization of 64.8%, considerably higher than the industry's 56.8%. Kinder Morgan's story is, however, favorable. This is because KMI, responsible for transporting roughly 40% of the natural gas consumed in the domestic market, has a debt-to-capitalization of 50.8%. EPD's Price Performance, Valuation & Estimates Units of EPD gained 18% over the past year, outpacing the 17.5% rise of the composite stocks belonging to the industry. One-Year Price Chart From a valuation standpoint, EPD trades at a trailing 12-month enterprise value to EBITDA (EV/EBITDA) of 10.08x. This is below the broader industry average of 11.48x. The Zacks Consensus Estimate for EPD's 2025 earnings hasn't been revised over the past seven days. EPD currently carries a Zacks Rank #4 (Sell). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. Only $1 to See All Zacks' Buys and Sells We're not kidding. Several years ago, we shocked our members by offering them 30-day access to all our picks for the total sum of only $1. No obligation to spend another cent. Thousands have taken advantage of this opportunity. Thousands did not - they thought there must be a catch. Yes, we do have a reason. We want you to get acquainted with our portfolio services like Surprise Trader, Stocks Under $10, Technology Innovators, and more, that closed 256 positions with double- and triple-digit gains in 2024 alone. See Stocks Now >> Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Williams Companies, Inc. (The) (WMB): Free Stock Analysis Report Enterprise Products Partners L.P. (EPD): Free Stock Analysis Report Kinder Morgan, Inc. (KMI): Free Stock Analysis Report
