Enterprise Products Partners (EPD -1.22%) is an income-producing machine. The master limited partnership (MLP) has a current yield above 7%, which is multiples higher than the S&P 500's dividend yield (around 1.3%).
Here's a closer look at the MLP's monster payout.
Drilling down into Enterprise Products Partners' distribution
Enterprise Products Partners recently declared its latest distribution payment. The MLP set the quarterly level at $0.525 per unit, putting the annualized rate at $2.10 per unit. That level was 1.9% above what it paid investors last quarter and a 5% increase from the year-ago level. With its unit price recently trading around $29, the MLP's forward dividend yield is now up to 7.2%.
The energy midstream company can easily afford its high-yielding payout. The company has generated about $8.2 billion of adjusted cash flow from operations over the last 12 months.
Meanwhile, it has distributed about $4.4 billion of cash to investors. That put its dividend-payout ratio at around 54%. This level allowed the MLP to retain plenty of cash to fund its expansion program ($3.6 billion of cash used in investing activities over the last 12 months). It also repurchased about $200 million of its common units.
Enterprise Products Partners should have plenty of fuel to continue increasing its high-yielding distribution (it has raised its payout at least once each year for a quarter-century). The company has about $6.9 billion of approved major capital projects under construction, including new pipelines, export terminal expansions, and other midstream assets. These commercially secured projects should enter service through 2026, giving the company lots of visibility into its future cash-flow growth.
A passive income machine
Enterprise Products Partners has been a great passive-income investment over the years. The MLP pays a high-yielding distribution that steadily rises, a trend that's likely to continue. That history of growth and healthy future outlook make it an ideal investment for those seeking to generate income and are comfortable investing in energy MLPs that send a Schedule K-1 for tax filing purposes each year.
