Enterprise Products Partners (NYSE:EPD) pays its investors well. The energy company yields 6.3% at the moment. That's well above the average of dividend stocks in the S&P 500, which is around 2%. This factor alone probably makes it an exceptional stock in the eyes of income investors.

However, current yield alone doesn't automatically make it a great dividend stock. The payout also needs to be sustainable over the long term and grow consistently. Here's how this master limited partnership's (MLP) distribution measures on those two key characteristics.

A roll of $100 bills next to a sign reading dividends.

Image source: Getty Images.

Drilling down into the financial foundation

Enterprise Products Partners has historically been one of the most financially conservative companies in the midstream sector. The MLP has routinely maintained a large margin of safety by having a well-covered distribution. While most MLPs aim to generate enough cash to cover their payout by at least 1.2 times, Enterprise's coverage has been around 1.7 this year. Furthermore, the company produces very stable cash flow overall, since fee-based contracts currently supply it with about 85% of its earnings.

On top of that, the company routinely has one of the highest credit ratings in the energy midstream space, which it backs with a conservative leverage ratio. Whereas most MLPs target a debt-to-EBITDA ratio of less than 4.0, Enterprise's leverage is currently 3.2.

Because of these factors, the company has enough internal financial capacity to self-fund its annual expansion program with room to spare. That has given it the flexibility to repurchase some of its units.

With such a sound financial profile, Enterprise Products Partners' payout is on as firm a foundation as investors will find in the energy patch.

A look at what's ahead for the dividend

Thanks to its fiscal conservatism, Enterprise Products Partners has been able to consistently increase its payout despite all the volatility in the oil and gas market. The company has now grown its distribution for the past 22 years, including in each of the past 61 consecutive quarters.

Enterprise Products Partners should have no problem continuing to grow its dividend in the coming years. Not only does it have a top-notch financial profile, but it also has an extensive pipeline of expansion projects under construction and in development. It currently has $9.1 billion of projects under construction, which should come online through 2023. That's one of the largest backlogs in the MLP sector. Meanwhile, it has more than $5 billion of additional expansions in the works, including projects to increase the capacity of its Seaway oil pipeline and build an offshore oil export terminal. These expansions should give it the fuel to continue growing its payout for years to come.

That steadily rising income stream is worth noting, given the historical performance of dividend growth stocks. While dividend payers have typically outperformed the S&P 500, companies that consistently increased their dividends have generated the greatest total annual returns. That has certainly been the case for Enterprise Products Partners over the years. Since its initial public offering more than 20 years ago, it has produced a more than 1,800% total return, which has crushed the S&P 500's 312% total return during that period.

Verdict: Enterprise Products Partners is a great dividend stock

Enterprise Products Partners offers income seekers an attractive yield backed by an excellent financial profile. It also boasts excellent growth prospects. Those factors have the potential to give this energy company the fuel to continue generating market-beating total returns. That makes it an outstanding stock for dividend investors to buy for the long haul.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.