Enterprise Products Partners (EPD +0.37%) has been an unstoppable passive-income machine over the years. The energy master limited partnership (MLP) has increased its payout for 24 straight years.
This streak seems likely to continue. That was clear from the pipeline company's third-quarter results and outlook for what's ahead. With a current yield of more than 7.6%, it's a great option for those seeking an attractive and steadily rising passive income stream.
NYSE: EPD
Key Data Points
Drilling down into the recent quarter
Enterprise Products Partners generated $1.9 billion of distributable cash flow during the third quarter. That's up 16% from the $1.6 billion it produced in the year-ago period. The company benefited from volume growth, recently completed expansion projects, higher commodity prices, and the acquisition of Navitas Midstream. Enterprise Products Partners produced enough money in the period to cover its high-yielding distribution -- which it has increased by 5.6% over the past year -- by a comfortable 1.8 times.
That enabled the MLP to retain $826 million of cash, pushing its year-to-date tally to $3.3 billion. That gave it the money to finance its expansion while maintaining a top-notch balance sheet. Enterprise has made $4.4 billion of capital investments this year, including acquiring Navitas Midstream for $3.2 billion. Meanwhile, it ended the period with a leverage ratio of 3.1, well below its target of around 3.5. That gives it ample financial flexibility to continue expanding its midstream operations as opportunities arise while also growing its big-time payout.
More growth is coming down the pipeline
Enterprise expects to invest about $1.6 billion on organic expansion projects this year and another $2 billion next year. These investments are part of a $5.5 billion backlog of commercially secured capital projects the company currently has under construction. Those projects are on track to enter service through 2025. That gives it lots of visible growth over the next few years.
The company has capitalized on improving energy market conditions this year to move forward with several new expansion projects. It unveiled three in the fast-growing Permian Basin a few months ago. It's building two new natural gas processing plants (including one related to the recently acquired Navitas Midstream) and expanding a natural gas liquids pipeline system. Those projects are all on track to come online in 2024.
Meanwhile, it has several other projects in development that could enhance and extend its current growth outlook. It continues to await regulatory approval to build its proposed Sea Port Oil Terminal (SPOT). It's partnering with fellow midstream giant Enbridge (ENB +0.93%) on an offshore oil export port anchored by oil producer Chevron (CVX +0.79%). SPOT would enable Enterprise and Enbridge to export oil faster for customers like Chevron. It would take two to three years to build the facility if approved.
NYSE: CVX
Key Data Points
Enterprise Products Partners is also looking for opportunities to invest in more sustainable energy. It's working with oil giant Occidental Petroleum (OXY +1.16%) on a potential carbon dioxide transportation and sequestration project for the Texas Gulf Coast region. It would utilize some of Enterprise's existing pipelines to transport captured carbon to a sequestration site operated by Occidental. Enterprise is also exploring carbon storage business opportunities with Chevron. Carbon capture and storage could help lower the carbon intensity of oil and gas, making it a much more sustainable form of energy by reducing its impact on the climate.
A top choice for collecting passive income
Enterprise Products Partners continues to generate a steadily rising stream of cash flow. That's giving it the money to cover its high-yielding distribution and invest in expanding its operations while maintaining a top-notch financial profile. It should have plenty of fuel to continue growing its distribution in the coming years, and that makes it a great stock to buy for those seeking an attractive and steadily rising passive income stream.
