Despite resilient performance even amid the pandemic, Enterprise Products Partners (NYSE:EPD) stock fell 30% in 2020. However, it has already risen an impressive 17% so far in 2021. The MLP recently raised its distributions (dividends that MLPs pay) for the 22nd consecutive year. Let's take a look at factors that may drive Enterprise Products Partners' performance in the coming years.

Strong operations

Enterprise Products Partners is a diversified midstream company involved in the transportation, storage, and processing of crude oil, natural gas, and natural gas liquids (NGLs) such as ethane, propane, and butane. The company's diversification and fee-based operations allow it to generate strong operational cash flows even when commodity prices are volatile. Around 87% of the company's earnings are fee-based. 

EPD EBITDA (Quarterly) Chart

EPD EBITDA (Quarterly) data by YCharts

As the above graph shows, Enterprise Products has consistently grown its earnings over the years despite volatile commodity prices. Strong earnings growth allowed the company to raise its distributions consistently for 22 years.

NGL pipelines and services are Enterprise Products' largest businesses, accounting for around half of its gross operating income. Its petrochemicals and refined products services business accounts for around 13% of its operating income. These two segments offset weakness in Enterprise Products' crude oil and natural gas business in 2020, reflecting the benefits of its diversified operations.

Growth opportunities

Not only has Enterprise Products Partners grown impressively so far, but it also has several ongoing growth projects that should fuel its earnings growth in the coming years. The company spent $2.9 billion on growth projects in 2020. Moreover, it has $1.6 billion of projects sanctioned for 2021 and $800 million of projects for 2022. Nearly two-thirds of the capital for projects under construction belongs to the petrochemicals and refined products segment. These include a new propane dehydrogenation (PDH) facility -- which produces propylene using propane feedstock -- supported by long-term agreements with LyondellBasell Industries. Propylene is a key feedstock for the petrochemicals industry and is used to produce numerous end products including plastics.

Long pipes in crude oil factory during sunset

Image source: Getty Images.

According to the International Energy Agency (IEA), petrochemicals could account for as much as 60% of the oil demand growth in the next decade. That is positive for Enterprise Products, which is involved both in the transportation and export of NGLs as well as the production of ethylene, propylene, and other feedstocks for the petrochemicals industry.

Another area where Enterprise Products Partners is witnessing strong growth is liquefied petroleum gas or LPG exports. LPG export demand growth is driven primarily by the residential market, including for cooking, in Asia and Africa. Additionally, Enterprise Products' export facilities are witnessing resilient demand across products including NGLs, crude oil, petrochemicals, and refined products. The company's export operations are huge -- accounting for roughly 23% of the total U.S. crude oil exports and 44% of the country's NGL exports.

Strong balance sheet

One of Enterprise Products Partners' key strengths that differentiates it from other energy companies is its strong balance sheet. Enterprise Products has always adopted a disciplined approach to growth. Its debt-to-EBITDA ratio has consistently been one of the lowest among its peers. The ratio is currently 3.7. Prudent selection of growth projects allowed the company to generate high returns on invested capital over the years.

Enterprise Products Partners' distributable cash flow for the first nine months of 2020 was 1.6 times the distributions paid for the period. That gives the company ample cushion for its payouts should earnings fall a bit. A strong balance sheet and healthy distribution coverage place it well to continue its distribution growth streak.

Due to a broader disinterest in energy stocks, Enterprise Products Partners may not generate market-leading returns soon. But it is a great dividend stock for investors looking for a steady income stream with little risk of a distribution cut and potential for capital appreciation. At the current yield, it looks well placed to generate higher total returns in the long term, making it a compelling buy.

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.