On the one hand, the meager 0.2% rise in the unit price of Enterprise Products Partners (EPD -0.56%) in April doesn't seem very noteworthy. However, with the S&P 500 plunging 8.8% last month, according to data provided by S&P Global Market Intelligence, it stood out as one of the few bright spots in a dismal month for the market.
A trio of factors nudged the master limited partnership (MLP) higher last month. Meanwhile, it provided investors with more good news in early May by reporting strong first-quarter results.
Enterprise Products Partners declared its first-quarter distribution in early April. The MLP set the payment at $0.465 per unit. That's 3.3% ahead of where it was a year ago. Overall, the company has increased its distribution to investors for 23 straight years.
The MLP also unveiled a new potential project last month. Enterprise Products Partners signed a letter of intent with a subsidiary of Occidental Petroleum to work toward a possible carbon dioxide transportation and sequestration solution for the Texas Gulf Coast. Enterprise would develop the carbon dioxide aggregation and transportation network utilizing new and existing pipelines. Meanwhile, the Occidental Petroleum business unit would develop sequestration hubs. The project could help lower the region's carbon emissions while providing new growth opportunities for Enterprise.
Finally, Morgan Stanley analyst Robert Kad raised the investment bank's price target on Enterprise Products to $31 from $27. The analyst made the move because of his bullish outlook on the sector for the balance of 2022 and his expectation that the company will report strong first-quarter results.
The MLP delivered on that expectation in early May. It reported record distributable cash flow of $1.8 billion. That was enough to cover its distribution by a comfortable 1.8 times. It also provided the company with money to fully fund its capital program and pay down some of the debt incurred to acquire Navitas Midstream.
That strong showing won more praise from analysts in early May. Truist analyst Neal Dingmann increased the bank's price target from $27 to $30, while Mizuho analyst Gabriel Moreen boosted that firm's price target from $30 to $32. Both made those moves following the company's strong results and outlook for what's ahead.
Enterprise Products Partners is benefiting from improving conditions in the energy market. Higher commodity prices are incentivizing oil and gas companies to drill more wells, boosting the volumes flowing through Enterprise's system. That's growing its cash flows in the near term while providing it with a growing list of expansion projects. Those catalysts should give it the fuel to continue increasing its 6.9%-yielding distribution. That makes Enterprise Products Partners an excellent option for investors seeking an attractive passive income stream.