Energy Stock Pick: Enterprise Product Partners

This week, I'm seeking a second robust dividend energy sector representative for my new Ivy portfolio. 

That energy sector includes six industries all related to bringing oil and gas to market. They are: drilling, exploration and production (E&P), equipment and services, integrated, midstream, refining & marketing.  (Yes, six oily and gassy enterprises.)

Today I'm reviewing a large-cap oil & gas midstream company, named Enterprise Product Partners LP Its trading ticker symbol is EPD.

Enterprise Products Partners LP is a limited partnership engaged in transporting and processing natural gas, natural gas liquids, crude oil, refined products, and petrochemicals.

The company operates through four segments: NGL Pipelines & Services, Crude Oil Pipelines & Services, Natural Gas Pipelines & Services, and Petrochemical & Refined Products Services. 

The NGL Pipelines & Services segment offers natural gas processing and related NGL marketing services, as well as NGL export docks and related services.. 

The Crude Oil Pipelines & Services segment operates approximately 5,800 miles of crude oil pipelines; and crude oil storage and marine terminals located in Oklahoma and Texas, as well as a fleet of 495 tractor-trailer tank trucks used to transport crude oil. 

The Natural Gas Pipelines & Services segment operates approximately 19,700 miles of natural gas pipeline systems to gather and transport natural gas in Colorado, Louisiana, New Mexico, Texas, and Wyoming.

The Petrochemical & Refined Products Services segment operates propylene fractionation and related activities, including 800 miles of pipelines; butane isomerization complex, associated deisobutanizer units, and related pipeline. 

The company was founded in 1968 and is headquartered in Houston, Texas.

I use three key data points to gauge the value of any dividend equity or fund like Enterprise Product Partners LP: 

(1) Price

(2) Dividends

(3) Returns

Besides those three, four more keys will finally unlock an equity or fund in which to invest.

But those first three primary keys, best tell whether a company has made, is making, and will make money. 

EPD Price

Enterprise's price per share was $26.24 at yesterday's market close. A year ago its price was $25.73 for a price gain of $0.51 per share for the year, or a 2% upside. 

Assuming Enterprise's price will trade in the range of $24 to $30 next year, Enterpise's recent $26.24 price could maybe climb by $2.00 and improve to $28.24 by early-December, 2019. 

EPD Dividends

Enterprise's most recent quarterly dividend was $0.4325 declared October 4th and paid out, November 8th. 

That $0.4325 quarterly stipend equates to an annual amount of $1.73 yielding 6.6% at yesterday's closing $26.24 price.

Gains For EPD?

Adding the $1.73 annual dividend to my estimated $2.00 annual price upside estimate for Enterprise Product Partners LP adds up to a $3.73 potential gross annual per share gain, which will be reduced by costs to trade the shares.  

For a little under $1,000.00 invested today at the $26.24 recent price we could buy 38 EPD shares. 

A $10 broker fee paid half at purchase and half at sale costs us $0.26 per share.

Subtract that $0.26 brokerage cost from the estimated $3.73 gross annual gain leaves a net gain of $3.47 X 38 shares 

= $131.86

for a 13.3% net gain on a $997.12 investment.

Therefore, Enterprise Product Partners LP, whose trading ticker symbol is EPD, now shows a possible 13.3% net gain including a 6.6% dividend yield. 

Twenty-four brokers cover this stock:

Sixteen say "buy" EPD shares.

Seven expect EPD shares to "outperform" its peers

One says "hold" your EPD shares

The median price consensus among those twenty-four brokers is a 34.15 target, exactly $5.91 over my $28.24 estimate.

Therefore, you can look at Enterprise Product Partners LP and see it has made money, is making money, but could net a 13.3% to 30.3% net annual gain including that  6.6% dividend yield. It could be more, it could be less. 

The above speculation is based on past year performance. The actual results remain to be seen to determine if Enterprise Product Partners LP is worth your time and money.