Enterprise Products Partners (EPD -0.41%) is an elite income investment. The master limited partnership (MLP) has increased its distribution to investors more than 75 times since its initial public offering in 1998, growing it for 24 straight years. Meanwhile, it offers a significantly above-average yield of 7.5%.
That upward trend in the payout should continue. Fueling that view is the company's ability to continue securing expansion projects. It recently captured a potentially significant long-term opportunity that could power its growth for years to come.
Making progress on the first project
Last spring, Enterprise Products Partners and Oxy Low Carbon Ventures (OLCV) -- an Occidental Petroleum (OXY 0.82%) subsidiary -- signed a letter of intent. They plan to work toward developing a carbon dioxide transportation and sequestration solution for the Texas Gulf Coast. The initial scope will focus on providing services to carbon dioxide emitters from the greater Houston and Port Arthur areas.
Enterprise will develop the carbon dioxide aggregation and transportation network using new and existing pipelines. Meanwhile, OLCV's 1PointFive business unit will develop the sequestration hubs.
Those efforts are starting to pay dividends. 1PointFive recently announced that it plans to develop a carbon capture and sequestration hub in Southeast Texas. The company has leased more than 55,000 acres along the Texas Gulf Coast to develop a hub that can hold about 1.2 billion metric tons of carbon dioxide.
The Bluebonnet Hub, as it's known, should be operational by 2026. 1PointFive and Enterprise Products Partners will work on furthering the development of a carbon dioxide transportation solution to move the greenhouse gas from emitters in the Beaumont-to-Houston region to this hub.
The first step toward capturing a potentially massive opportunity
Occidental Petroleum estimates carbon capture could become a $3 trillion to $5 trillion global industry. It believes the technology could eventually generate as much income for the company as it currently makes producing oil and gas.
Occidental is focusing on directly capturing the greenhouse gas from the atmosphere and sequestering it underground. It plans to use carbon dioxide to produce oil through enhanced oil-recovery techniques. It also intends to permanently store it in other underground formations.
The company is using third-party midstream companies like Enterprise to transport the carbon from capture points to sequestration hubs. Enterprise believes that its extensive pipeline infrastructure in the Gulf Coast region makes it a perfect partner for carbon capture developers like Occidental Petroleum:
Image source: Enterprise Products Partners.
As the map above shows, Enterprise Products Partners has an extensive existing pipeline network near large carbon emitters that it could repurpose to transport carbon dioxide.
Carbon capture represents a large-scale opportunity for Enterprise Products Partners. It would supply the company with a new and growing income source, enabling it to earn steady fees as it transports captured carbon dioxide from emitters to sequestration hubs.
Meanwhile, the technology could extend the life of legacy industrial processes and oil and gas production since companies could significantly reduce emissions without switching to alternative fuels. Because of that, the technology could improve the utilization of Enterprise's existing assets and extend their life as fossil fuels remain a vital energy source.
By improving the long-term sustainability of its legacy business and enhancing its growth prospects, Enterprise Products Partners can use carbon capture to continue growing its cash flow for years to come. That could allow the company to continue growing its distribution to investors.
An attractive income investment
Enterprise Products Partners has an excellent track record of distribution growth. The company should have plenty of fuel to continue growing its payout, especially as it taps into the potentially massive carbon capture and storage market. It makes the company an even better income investment for the long haul.
