Midstream master limited partnership (MLP) Enterprise Products Partners (EPD 0.68%) has a very attractive distribution yield of 7.5% today. That's the type of number that would attract income investors, but a look at history suggests that the high yield here shouldn't limit this MLP to dividend types. Here's why.

The business basics of Enterprise Products Partners

Enterprise Products Partners is one of the largest owners of energy infrastructure in North America. It charges customers fees for the use of its pipelines, storage, processing, and transportation assets. The toll-taker nature of its business provides consistent cash flows to support the MLP's sizable shareholder distributions. High yields are fairly common in the midstream space.

MLPs are a bit more complicated to own than traditional companies tax-wise, requiring unitholders to deal with a K-1 form come April 15. However, they can also generate tax-advantaged income thanks to the pass-through nature of the business structure. All in, if you are willing to do a little more legwork around tax time, Enterprise is an attractive income stock. Highlighting this fact is the 24 years of annual distribution increases it has provided to unitholders.

And yet there's another story that needs to be told. Dividend investors often live off of the income their portfolios generate. But what if those dividends, or distributions in the case of Enterprise, were reinvested? You track that by looking at the total return. Historically, Enterprise has generated strong total returns when its yield has been as high as it is today.

Go to the charts on Enterprise

At the start of 2015, Enterprise's distribution yield was hovering around 4%. At that point, investors' view of the midstream sector was quite positive. But if you had purchased the MLP at the start of 2015 your total return would have badly lagged that of the S&P 500 Index. As the chart below shows, the S&P's return, with dividends reinvested, was 152% since the start of 2015 while Enterprise's total return was a slim 31%. 

EPD Total Return Price Chart

EPD Total Return Price data by YCharts

That's basically a case of buying high. But what about buying in 2003 when Enterprise's yield was up around the 7.5% at which it currently sits? That was effectively buying low and the chart below shows that it worked out very well for investors. Since the start of 2003, Enterprise's total return has been 900% compared to the 640% for an S&P 500 Index ETF.

EPD Total Return Price Chart

EPD Total Return Price data by YCharts

That's a dramatically different story, but it makes some sense. Specifically, the long-term return on stocks is generally around 10% or so. Thus, the 7.5% distribution yield gets investors around three-quarters of the way there. Add in regular distribution growth and the reinvestment of distributions and the compounding power from that high starting yield is huge. Clearly, it helps that Enterprise has a large and strong business supporting its distribution, which isn't always the case with high-yield stocks. But, with the MLP's yield high again, both income investors and those looking for growth should find this midstream giant of interest. 

Rhyming times for Enterprise

As every investor knows, past performance is no guarantee of future results. But dividend reinvestment is a powerful force that shouldn't be overlooked, especially when the dividend is backed by a strong business. Enterprise's historical performance shows that and hints, strongly, that the high yield that's on offer today could support impressive total returns ahead.

The bigger takeaway here, however, is that buying when others are fearful can, and often does, lead to impressive rewards for investors over the long term. Dividend yield alone isn't a perfect way to suss out attractive stocks, but a historically high yield is a good starting point for further research.