Enterprise Products Partners (EPD +0.32%) is known for its nearly 7%-yielding distribution, but it's on the verge of a growth acceleration. About $6 billion in organic growth capital projects will enter commercial service in the second half of this year. They will boost the master limited partnership's (MLP) income and support its ability to extend its 26-year streak of distribution increases.
Here's a closer look at what the MLP has coming down the pipeline.
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Starting to hit the accelerator
Enterprise Products Partners recently reported its second-quarter financial results. The midstream company generated $1.9 billion of distributable cash flow during the period, representing a 7% increase from the prior year. That's an acceleration from the first quarter when its distributable cash flow increased 5% year over year to $2 billion.
The MLP delivered higher year-over-year earnings growth "in a seasonally weaker quarter challenged with macroeconomic, geopolitical, and commodity price headwinds," commented co-CEO Jim Teague in the second-quarter earnings press release. The company's operations performed well as it delivered five new operating records in the period, including record gas processing volumes, gas pipeline volumes, crude oil pipeline volumes, and refined product and petrochemical pipeline volumes.
NYSE: EPD
Key Data Points
The pipeline company benefited from the strength of its legacy operations. It also got a boost from growth investments it completed last year. The MLP closed its acquisition of Pinon Midstream, acquired assets from Western Midstream, and completed several growth capital projects, including both phases of its TW Products System and two additional gas processing plants.
More growth is coming down the pipeline
Enterprise Products Partners didn't complete any major growth capital projects or acquisitions in the first half of this year. However, that's about to change. "We are excited for the opportunities the second half of 2025 is poised to present with approximately $6 billion of our organic growth capital projects slated to enter commercial service," stated Teague in the second-quarter earnings press release.
The co-CEO highlighted that the MLP is on the cusp of a "significant expansion of our natural gas processing infrastructure in the Permian Basin." Enterprise Products recently commissioned two new natural gas processing plants in the basin (Orion and Mentone West). It's also building new gas gathering, compression, and treating assets in the region.
"Further downstream, we are beginning service at the Neches River Terminal ("NRT") in Orange County, Texas," stated Teague. He commented, "the successful commercialization of the NRT facility reflects the robust growing global demand for U.S. hydrocarbons and highlights Enterprise's ability to quickly and economically expand its footprint to meet the needs of international markets." Finally, the company expects to commission Frac 14 and the Bahia pipeline in the fourth quarter of this year.
This expansion project wave gives the MLP lots of momentum heading into 2026, which should continue throughout next year. Enterprise Products Partners has several additional growth capital projects on track to enter commercial service next year, including its Mentone West 2 plant, the second phase of NRT, and an expansion of the Enterprise Hydrocarbons Terminal. Additionally, the company has more than $700 million of incremental projects under development that it could approve over the next two years.
Meanwhile, Enterprise Products Partners has ample financial flexibility to approve new growth capital projects and make acquisitions as opportunities arise. The company is currently on track to produce $2 billion of additional free cash flow next year as growth capital spending falls from $4 billion-$4.5 billion this year to $2 billion-$2.5 billion in 2026. It also has the strongest balance sheet in the midstream sector. Securing additional growth investments would further support its long-term growth outlook.
Ample fuel to continue increasing the distribution
Enterprise Products Partners has increased its high-yielding distribution for 26 straight years, including by 3.8% over the past year. Given the visible earnings growth from new assets and its strong financial position, further distribution increases appear likely. For investors, this adds a layer of growth opportunity to what is already an attractive income investment. It makes the MLP ideally suited for those seeking both income and long-term growth (and who are comfortable with the Schedule K-1 Federal Tax Form it issues).
