This 7% yielding dividend stock continues to put cash in the pockets of its investors

Enterprise product partners (EPD 0.20%) it’s as reliable as they come. The master limited partnership (MLP) paid cash distributions to its unitholders on each single quarter since its initial public offering (IPO) 26 years ago. Most recently, he extended that streak by declaring his latest distribution payout. While the MLP didn’t raise payouts this quarter, its current level is 5% higher than the same period last year, thanks to its steady distribution increases. It has raised its distribution payout twice this year and every year since going public.

The MLP should you have no problems continuing to put cash into the pockets of its investors every quarter. Because of this, income investors can rely on its distribution yielding around 7%.

Built to be trusted

Enterprise Products Partners operates a diversified platform of energy businesses. Most of them assets generate predictable fee-based cash flows backed by long-term contracts or government-regulated rate structures. It makes money as volumes flow through its various media assets. Over the last 12 months, the MLP produced $8.4 billion in adjusted cash flow from operations.

The pipeline company it is very conservative in how it allocates its cash flow. It paid out $4.4 billion in cash distributions over the past year, about 52% of its adjusted cash flow. This allowed him to retain about $4 billion. It used that money to buy back units ($200 million) and fund most of its investment activities ($4.1 billion), allowing it to maintain its fortress-like balance sheet.

Enterprise Products Partners has set the standard for balance sheet strength in the midstream sector, where it has the highest level credit rating (A-/A3). It also has a very low leverage ratio (3.0x) and uses primarily low-cost, long-term, fixed-rate debt to finance its business. This top-notch balance sheet gives him tremendous financial flexibility.

the MLPs combination of stable cash flow and conservative financial profile place it in a strong position to continue paying its profitable distribution.

Space for growth

Enterprise Products Partners’ primary financial objective is to increase its cash flow per unit. It does this in various ways, notably by investing in intermediate energy infrastructure with attractive returns. The MLP uses its financial flexibility to build and expand midstream infrastructure assets and to buy midstream assets and platforms.

MLP recently agreed to acquire Pinon Midstream for $950 million in cash. The business was highly strategic and benefited its cash flow and growth profile. Co-CEO Jim Teague commented on the transaction in a press release. He stated:

These assets accelerate our entry into this region by at least three to four years. These assets are highly complementary to our midstream energy system and provide us with an excellent entry point into the eastern flank of the Delaware Basin to expand our natural gas processing footprint.

Meanwhile, the acquisition will add $0.03 per share to its distributable cash flow in the first full year. There are additional benefits from commercial and operational synergies and an embedded opportunity to expand Pinon’s processing capacity from 450 million cubic feet per day (450 MMcf/d) to 750 MMcf/d in the future.

This upcoming expansion project would add to Enterprise Products Partners already extended stock of commercial guarantees major projects. The MLP currently has $6.7 billion in projects expected to come on stream by the end of 2026. They support future cash flow growth and return on capital for investors.

MLP has many other projects under development, including a potential great the offshore oil export terminal (SPOT) project. In the meantime, it has ample financial capacity to fund new expansion projects and continue to make incremental acquisitions. Future investments to expand its midstream footprint would enhance and expand its growth profile and ability to increase its distribution.

A reliable investment for income

Enterprise Products Partners continues to consistently provide income to its investors. The MLP should be able to grow its payout at a healthy rate every year for the foreseeable future given its financial strength and visible growth prospects. That’s what it does a great one income investments to be held for the long term for those who are comfortable owning an MLP (which sends investors a Schedule K-1 Federal Tax Form every year).