Quite frankly, there isn't much to dislike about Enterprise Products Partners' (EPD 1.64%) distribution. The midstream energy leader offers a forward distribution yield of 6.3%. It has also increased the distribution for 27 consecutive years. That streak is especially impressive considering the challenges the energy sector has faced at times over the last three decades.
Enterprise Products Partners just finished a banner year on several fronts, with record cash flow from operations in 2025 and all-time high earnings before interest, taxes, depreciation, and amortization (EBITDA) in the fourth quarter. The pipeline stock is at its highest level in 10 years.
And there's more good news for income investors: Enterprise Products Partners' monster payout could get even bigger.
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A buyback bonanza
Despite the solid performance in 2025, there was one fly in the ointment. Enterprise Products Partners' discretionary free cash flow after distributions to its limited partners was a negative $1.6 billion. This negative number stemmed from the midstream company's significant capital investments.
However, Enterprise Products Partners expects lower capital expenditures this year. As a result, management projects discretionary cash flow in the ballpark of $1 billion. Co-CEO Randy Fowler said in the fourth-quarter earnings call, "In the near term, we expect for our discretionary free cash flow to be split between buybacks and retiring debt." He added that the split could be as high as 60% to unit buybacks and 40% to debt reduction.
Stock buybacks (or, in the case of limited partnerships, unit buybacks) are sometimes referred to as "invisible dividends." That nickname is an apt one, in my opinion. Fowler seems to be on the same page.
He noted in the Q4 update that Enterprise Products Partners intends to increase its distribution in 2026. Those increases shouldn't be a problem, given that the LP's payout ratio based on adjusted cash flow from operations was 58% last year. Importantly, though, Fowler also explained, "Future growth in cash distributions to partners can also be further enhanced by the percent of common units we retired through buybacks." He's exactly right.
The more that Enterprise Products Partners buys back units, the fewer units its total distribution amount is spread across. The math is simple: Increased buybacks lead to higher distributions per unit for the remaining outstanding units.
Breakout growth around the corner
Fowler's fellow co-CEO, Jim Teague, seemed to seek to hold down investors' expectations for this year. Teague said in the Q4 call that the LP anticipates "modest growth in 2026." There's more to the story, however.
Enterprise Products Partners could be poised for breakout growth beyond 2026. The company has several projects coming into service, the full impact of which will be felt in 2027. For example, the second train at Enterprise's Neches River facility will go online by the second quarter of this year. Also, another processing plant in the Midland Basin should be operational later in 2026.
Teague predicted that Enterprise Products Partners will deliver double-digit growth in 2027 once all its new assets reach full utilization. Fowler concurred, stating that the LP expects 10% year-over-year adjusted EBITDA and cash flow growth in 2027.
The midstream operator's distribution in the fourth quarter of 2025 was 2.8% higher than in the prior-year period. If Enterprise's cash flow grows by roughly 10% next year, the growth rate could accelerate significantly.
A lot to like
In my opinion, Enterprise Products Partners checks off pretty much every box for income investors. Its distribution track record is exemplary. Its yield is ultra-high. The LP's balance sheet is solid. Enterprise has clear visibility to double-digit cash flow growth after this year. Value investors could also like its forward price-to-earnings ratio of 12.1
I predict that this high-yield dividend stock's monster payout not only could get even bigger but will get bigger.
