Enterprise Products Partners: Is Its 7.2% Yield Still Safe?

Last year, we analyzed Enterprise Products Partners‘ (NYSE: EPD) dividend safety. Due to its large amount of cash available for distribution (CAD), which is a measure of cash flow, the company received an “A” rating. In other words, the dividend was extremely safe.

Has that changed in the 14 months since we last looked at the company?

In case you’re unfamiliar with it, Enterprise Products Partners is a 55-year-old oil and gas pipeline company.

Its CAD dipped slightly in 2020, but in 2021, it rebounded to 2019 levels. It then exploded higher in 2022, but this year it’s expected to dip from $7.75 billion to $7.55 billion.

Chart: Enterprise Products Partners' CAD Has Exploded Higher

Last year, Enterprise Products Partners paid $4.1 billion in distributions. (Since it is a master limited partnership, it pays a distribution, not a dividend. Distributions are similar to dividends but have different tax ramifications.)

The $4.1 billion distribution was 53% of the company’s CAD. This year, that figure is expected to rise to 57%. That means for every dollar Enterprise Products Partners has in cash flow, it is projected to pay out $0.57 in distributions. That’s a low number, and it means the company can easily afford its distribution.

The other thing Enterprise Products Partners has going for it is its distribution payment history.

It has raised its distribution in each of the past 25 years and just raised the payout to $0.50 per share in August. The stock yields a juicy 7.2%.

The strong cash flow and quarter-century-long track record of annual distribution raises tell me the distribution is safe. The only mark against the company is the expectation that CAD will decline this year. However, even if cash flow does come in slightly lower than where it was last year, it will still be more than enough to cover the distribution – and a raise in the near future.


Dividend Safety Rating: B

Dividend Grade Guide


More By This Author:

A Few Simple Steps To Offset Inflation
Global Net Lease: Is This 16% Yield “Stable”?
The Recession That Isn't Happening

How did you like this article? Let us know so we can better customize your reading experience.

Comments