Midstream limited partnerships Buckeye Partners (NYSE:BPL) and Enterprise Products Partners (NYSE:EPD) were running neck and neck, with each offering income investors decades of annual distribution increases. Then their paths diverged, with Buckeye first failing to increase its distribution, and then eventually cutting it. It's been working its way back from that -- but now something new has happened.

Based on this development, some investors might wonder if a position in Buckeye today is better than one in industry bellwether Enterprise Products Partners. Here's what you need to understand to decide.

Going, going, gone

Too much leverage driven by an acquisition that didn't work out forced Buckeye to reevaluate its business. The end result was a decision to sell the acquired business (a 50% stake in an international energy storage company) and to cut the distribution. Buckeye's new focus was on reducing leverage and investing in midstream growth projects in the pipeline space. It was starting to show some progress as 2019 got under way.

A scale weighing blocks that spell out risk and reward.

Image source: Getty Images

And then in May it received a takeover offer from IFM Global Infrastructure Fund, which sent its shares sharply higher. The all-cash deal is expected to close before the end of 2019, which means that between today and the close of the acquisition investors can lock in the difference between Buckeye's current unit price and the proposed purchase price, plus any distributions along the way.

Buckeye's current price is around 2% below the $41.50 per unit offer. It will likely pay at least one distribution, perhaps two (depending on the timing of the deal). Each distribution will add $0.75 per unit to the total return equation. All in, buying the partnership today will likely lead to a return somewhere between 3% and 6% or so, depending on the actual price you pay for the units and the number of distributions you receive. That's obviously assuming the deal gets completed as currently expected, but there's nothing to suggest that won't happen at this point.

However, that return would be for roughly half a year. If you annualize that, it would lead to a return of around 6% to 12% for this investment. So buying Buckeye would make some sense for an investor who's willing to risk that the deal isn't completed. If the deal is scuttled you would own a midstream company working on a turnaround, and the roughly 27% premium over Buckeye's price before the deal would likely disappear.

That's a pretty big trade-off for a partnership that's really more of a special situation play at this point. Only more aggressive investors should be making this bet.

Slow and steady

For most, an investment in boring old Enterprise would be the better option. No, there likely won't be any exciting news from this giant midstream partnership. But that's pretty much why investors own it. There's an outside chance that the partnership will look to change its corporate structure, but it has been working to shift toward a self funding model that suggests the distribution would likely stay in place if it did so. As of the first quarter it had an incredibly strong 1.7 times coverage ratio.

BPL Financial Debt to EBITDA (TTM) Chart

BPL Financial Debt to EBITDA (TTM) data by YCharts

What's more likely here is that Enterprise continues its slow and steady march, with quarterly distribution increases (its quarterly streak is up to 59 and counting) backed by long-term investments in U.S. energy infrastructure. In fact, there's huge demand for pipelines and other assets today. U.S. onshore oil and natural gas production growth has overwhelmed the infrastructure available to move fuels from where they are drilled to where they get used.

Enterprise currently has roughly $5 billion worth of capital projects in the works, which will take it through 2020. There's likely to be more added to the list over time as well. That spending, in turn, will back continued distribution growth and growth in the partnership's already industry-leading business. It's hard to complain about what's happening at Enterprise today.

That said, aside from the generous 6% yield, there's no guarantees with Enterprise -- and even the distribution could be cut, though that's highly unlikely. Mr. Market will dictate your return over the next six months or so. However, for most investors, the long-term opportunity here is much better than the short term return potential offered up by Buckeye today. Enterprise is the type of boring investment with which conservative income investors could fall in love.

Invest for the long term

At the end of the day, an active investor looking for a quick win could use leverage to buy Buckeye units. This type of aggressive, special situations investor would lock in a small gain in the units and amplify that return by adding the risk of leverage. If everything works out, it could be a decent investment for a few months.

But this is not the type of thing that most investors should be trying to do. Enterprise is a conservative midstream partnership with a long-term growth focus. It will likely never excite you, but that's the point. You can collect a generous yield while this tortoise plugs away. That's perfect for income investors and those with a conservative bent.