After experiencing some headwinds related to the roll-off of favorable contracts in its LPG (liquefied petroleum gas) business in 2025 and a return to more normalized spreads, Enterprise Products Partners (EPD 0.70%) shares rose after the company returned to growth in the fourth quarter and projected growth to accelerate through 2027.
Stronger growth ahead
Despite recent headwinds, Enterprise still operates a steady business model with strong visibility. Approximately 82% of its gross operating profit in 2025 came from fee-based activities, which is back to historical levels after a few years of benefiting from high differentials.
In Q4, Enterprise's total gross operating profit rose by 4% to $2.74 billion, while its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) also increased by 4% to $2.71 billion. Distributable cash flow (DCF) rose by 3% to $2.22 billion, while adjusted free cash flow came in at just $1.17 billion.
NYSE: EPD
Key Data Points
The master limited partnership (MLP) currently has a forward yield of 6.4% and has been one of the most consistent high-yield dividend stocks in the sector, given its conservative and shareholder-friendly nature.
Despite a lackluster 2025, Enterprise's distribution remained well covered, and its balance sheet remains in good shape. It had a 1.8x coverage ratio in Q4, based on its DCF, while it ended the year with leverage (net debt adjusted for equity credit in junior subordinated notes divided by adjusted EBITDA) of 3.3 times. It paid a $0.55 per unit quarterly distribution, which was up 2.8% year over year. It also repurchased $50 million in stock in the quarter.
Looking ahead, Enterprise forecasted that its adjusted EBITDA and cash flow would grow at the lower end of its 3% to 5% targeted range in 2026. However, it projected double-digit growth in both categories in 2027 as new projects come online. The company has also lowered its capital expenditure (capex) budget for this year, taking it to a range of $2.5 billion to $2.9 billion from $4.4 billion in 2025. As such, it thinks it has the potential to produce around $1 billion in discretionary free cash flow in 2026, which is its free cash flow after paying out its distributions.
Image source: Getty Images.
Is the stock a buy?
After an uninspiring 2025, Enterprise is in a much better position heading into 2026. With reduced capex, the company will have a lot of discretionary free cash flow to make moves, including paying down debt, buying back more shares, or making strategic acquisitions. Meanwhile, its distribution remains well covered, and it should continue its streak of upping its payout for a 28th straight year in 2026.
With the company projecting growth to ramp up in 2027, now looks like the time to own the stock.
