Please ensure Javascript is enabled for purposes of website accessibility

Why Units of Enterprise Products Partners Rebounded 27% in April

By Matthew DiLallo – May 8, 2020 at 2:04PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

A few factors helped the MLP bounce back last month.

What happened

Units of Enterprise Products Partners (EPD -5.22%) have been excruciatingly volatile this year. The MLP plummeted nearly 40% in March due to cratering crude prices. It clawed some of that back after rallying 27.3% in April, according to data provided by S&P Global Market Intelligence. Aside from some stabilization in the oil market, the MLP reported solid first-quarter results, which helped lift some of the weight on the company's valuation. 

So what

Enterprise Products Partners' earnings and cash flow both slipped by low-single-digit rates during the first quarter as it felt some impact from all the volatility in the oil market. The company also warned that the glut of oil due to the COVID-19 outbreak would likely weigh on volumes during the second quarter. Because of that, it planned to cut capital spending by $1 billion as well as cut an additional $100 million of maintenance-related projects. 

Pipelines heading towards the bright sun.

Image source: Getty Images.

Those spending cuts will reduce the amount of money Enterprise needs to borrow to finance expansion. Because of that, investors have more confidence that it can maintain its payout during the downturn. 

Now what

With units of Enterprise Products Partners still down sharply for the year, its distribution yields right around 10%. While a payout that high is often a red flag, that doesn't appear to be the case with Enterprise Products Partners. The company has a strong balance sheet and high-quality cash flows, which supports its belief that it can defend and maintain its distribution during this downturn. Because of that, it's a highly attractive option for yield seekers to buy even after last month's rebound. 

Matthew DiLallo owns shares of Enterprise Products Partners. The Motley Fool recommends Enterprise Products Partners. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Enterprise Products Partners L.P. Stock Quote
Enterprise Products Partners L.P.
EPD
$23.62 (-5.22%) $-1.30

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
329%
 
S&P 500 Returns
106%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.