Enterprise in sweet spot of energy market
This MLP offers rising dividends and capital gains supported by strong earnings growth.
By Mark Skousen, Forecasts & Strategies
Enterprise Products Partners (EPD), based in Houston, it is the country's largest master limited partnership.
Enterprise gathers natural gas from wellheads from the Rockies to the offshore Gulf of Mexico. Enterprise operates gas processing plants and provides storage and fractionation for natural gas liquids to the petrochemical industry.
By creating a pipeline network for the transportation of domestic oil and gas -- including Bakken oil -- Enterprise Products is in the sweet spot of the new energy bull market.
Export capacity almost doubled from 4 million barrels per month to 7.5 million barrels per month at its propane export terminal in Texas. Capacity could grow to 10 million barrels per month by 2015.
Enterprise is in a privileged position to benefit from increasing demand for natural gas liquids over the next years. For example, it's developing a new 270-mile pipeline header system that will deliver ethane to petrochemical plants in the U.S. Gulf Coast region.
Financially, steadily increasing distributions and capital gains supported by strong earnings growth make a powerful case for Enterprise Products. Last year, the company achieved record net income, earnings per share and distributable cash flow.
Investors often complain about the complex tax aspects of master limited partnerships, but from Enterprise's viewpoint, MLPs are a positive.
Enterprise doesn't pay taxes at the corporate level, and this situation lowers its cost of capital in comparison to its incorporated peers.
Yielding 4.5%, Enterprise looks well positioned to deliver increasing revenues and distributions. It has outperformed its peers in the past five-, three- and one-year periods, with the highest earnings and dividend growth.
It is already ahead 20% this year, but usually moves higher before its earnings report (April 30). We continue to recommend purchase.
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The solid report comes a month after the retailer closed all of its Canadian operations.
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