Investing for dividend income is often a trade-off between high yields and dividend security. Maximizing current income can make many investors uncomfortable because of the extra risk it entails. Enterprise Products Partners L.P. (NYSE:EPD), however, offers investors a nice middle ground between safety and yield. Here's what you need to know about this high-yielding partnership.

A boring but lucrative business

Enterprise is one of the largest oil and natural gas midstream partnerships in the United States. It owns everything from pipelines to processing facilities to a fleet of ships. The vast majority of its revenue comes from fees, meaning it's basically a toll taker. The often volatile prices of oil and natural gas are far less important than the demand for these vital fuels.

Man standing in front of midstream infrastructure

Image source: Getty Images.

More important to income investors, however, is the fact that the partnership structure is designed specifically to pass income on to investors. Enterprise has a distribution yield of 6.4%. That's around three times the yield offered by the broader market backed by a very stable, fee-based business.

Just how stable is it? During the oil downturn, which started in mid-2014, Enterprise's distributable cash flow flatlined, but didn't fall along with oil prices. And the partnership continued to increase its dividend each quarter (more on this in a bit) while maintaining distribution coverage of at least 1.2 times every year -- a solid number in the partnership space.    

How Enterprise looks to grow

Because Enterprise passes through so much income, however, growth is another important consideration. Partnerships like Enterprise expand by growing their asset base via expansion projects and acquisitions. This is another place in which Enterprise shines. Since 2014, the partnership has made three acquisitions and spent around $10 billion on capital projects, all while growing its distribution and maintaining solid distribution coverage.    

A bar graph showing Enterprise Products Partners capital spending with a line chart over it showing debt levels

Enterprise continued to grow through the oil downturn. Image source: Enterprise Products Partners L.P.

To be fair, Enterprise's debt levels increased through that span largely because of the opportunistic acquisitions. But things are relative: Similarly large peer Kinder Morgan Inc. (NYSE:KMI) cut its dividend in 2016 so that it could keep investing in its business. The big difference between the two pipeline owners was debt. Enterprise still has notably less leverage, by the way, even though Kinder's financial position has improved enough for it to start thinking about increasing dividends again.

EPD Financial Debt to EBITDA (TTM) Chart

EPD Financial Debt to EBITDA (TTM) data by YCharts.

Looking to the future, Enterprise has around $9 billion worth of growth projects in the works. It's huge, with a $56 billion market cap, and needs to spend like that to keep growing the business. But those outlays should keep the distribution moving steadily higher over time. Which is another reason to like Enterprise. The partnership has increased its payout annually for 20 years, including a hike in each of the last 52 quarters. That kind of consistency is comforting.    

Why Enterprise is a smart pick

High-yielding Enterprise has proven that it can continue to grow and reward investors in even the most inhospitable energy markets. What it won't do is excite you. That's good in some ways, but there is a trade-off: Distribution growth has averaged around 5% a year over the past decade, and that's about all you should expect going forward. That beats the historical growth rate of inflation, so it's not a bad number, but you need to go in knowing this is a "slow and steady wins the race" type of investment. That's just the type of high-yielding investment any conservative investor should be looking for.    

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Kinder Morgan. The Motley Fool recommends Enterprise Products Partners. The Motley Fool has a disclosure policy.