Jim Teague, co-CEO of Enterprise Products Partners (EPD 1.22%), recently purchased nearly 4,200 additional units of the master limited partnership (MLP). He now owns over 2.8 million units in the MLP. While that gives him a small percentage of its total outstanding units, insiders (including the founder's family) own 32% of the company. That high insider ownership helps align their interest with public unit holders.
Insider buying is typically a bullish sign. It suggests management expects the company's value will increase in the future.
Teague has reasons to back that view with his own money. The MLP's adjusted cash flow from operations increased 10.5% in the second quarter, rising to $2.1 billion. It has generated $8.4 billion in cash over the past year and returned 55% to limited partners through distributions and unit repurchases.
The midstream giant has raised its cash distribution by 5% over the past year, its 26th straight year of increasing its payout. It currently yields more than 7%, putting it well above the S&P 500's sub-1.5% dividend yield. In adding to his position, Teague will collect more of the MLP's lucrative, steadily rising income stream.
He'll also benefit from the growth it has coming down the pipeline. The company currently has $6.7 billion of major capital projects under construction that should enter commercial service through 2026. That provides lots of visibility into its ability to grow its cash flow and distributions.
Further, under Teague's leadership, the MLP has a knack for making accretive acquisitions. It recently agreed to buy Pinon Midstream in a $950 million deal. That acquisition will add about $0.03 to its distributable cash flow per unit next year. That's "before considering the benefit of any commercial and operating synergies," according to comments by Teague in the deal's press release.
The company's investments to expand its operations should increase its cash flow, giving it more fuel to grow value for investors. It's a great investment for those seeking a steadily rising passive income stream (and are comfortable receiving a Schedule K-1 federal tax form each year).
