Enterprise Products Partners (EPD +0.25%) is not an exciting business, which is why investors will appreciate its lofty 5.5% distribution yield. Notably, the distribution has been increased annually for 27 consecutive years, which is basically as long as the master limited partnership (MLP) has been public. While Enterprise is a boring business, it is a potentially exciting long-term income investment. Here's where it will be in one year.
The big news in the energy sector
The geopolitical conflict in the Middle East is the headline-grabbing story in the energy sector today. There's a good reason for that: this energy market disruption has driven oil and natural gas prices dramatically higher. Given that oil prices have a long history of being volatile, it pays for income lovers to think beyond the current price spike. Eventually, energy prices will fall. When they do, Enterprise Products Partners is likely to see very little impact.
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That's actually great news, and why more conservative dividend investors should feel comfortable owning this high-yielder. Enterprise operates in the midstream, owning energy infrastructure assets. It charges customers fees for the use of its assets, which basically connect the upstream (energy production) to the downstream (chemical and refining) and the rest of the world.
The volume of energy Enterprise moves is far more important than the price of what it moves. Given the importance of energy to the global economy, demand tends to remain strong throughout the energy cycle. Right now, meanwhile, the MLP's North American focus is insulating it from the Middle East conflict. So one year from now, regardless of what happens to oil prices or what events unfold in the Middle East, Enterprise is likely to be just as dependable a business as it is right now. The yield will still be attractive, and the distribution streak will likely be 28 years long.
NYSE: EPD
Key Data Points
The long term could be even brighter for Enterprise
Enterprise grows by building new assets, which is a very long process. For example, it has projects it is developing that won't get completed until the end of 2027. While this is another reason why not much is likely to change in the next year, it highlights a long-term opportunity.
The conflict in the Middle East may prompt countries to reevaluate their energy security. If that happens, the financially and politically stable United States and Canada may see increased global demand for their energy. Enterprise will not only benefit from robust demand for its existing assets, but it could also allow the MLP to expand its capital investment plans. That would lead to more slow-and-steady long-term growth. Enterprise may be a boring investment over the next year, but it could be much more exciting over the longer term.
