Reuben Gregg Brewer, The Motley Fool

Sun, Jun 22, 2025, 3:08 AM4 min read

• Enterprise Products Partners operates a large U.S. based midstream business.

• The master limited partnership has a large and attractive yield backed by years of reliable distribution growth.

• Its units have rallied, but here's why they are still worth buying.

• 10 stocks we like better than Enterprise Products Partners ›

Enterprise Products Partners (NYSE: EPD) operates in the most reliable segment of the energy industry. It is financially strong, has reliable cash flows, and a large yield.

But there's one little problem that may cause investors to pause. Enterprise Products Partners' unit price has rallied roughly 60% over the past five years. Is it still worth buying this master limited partnership (MLP)? The answer is yes, and here's why.

To simplify things a lot, Enterprise is a toll taker. It owns energy infrastructure, like pipelines, that move oil and natural gas around the world. It doesn't care all that much about the price of the commodities it is moving through its system. It cares that it moves as much volume as possible through its systems, collecting fees for every unit of product it moves.

Oil and natural gas, and the products into which they get turned, are vital to modern life. So even when energy prices are weak and when economic activity is slow, demand for Enterprise's services tends to be fairly strong. The reliable cash flows it generates are used to support the MLP's lofty 6.8% distribution yield. That distribution has been increased every year for 26 consecutive years.

Supporting that hefty yield is an investment grade balance sheet. Adding to the security of the payment is the fact that distributable cash flow covers the distribution 1.7 times over, leaving plenty of room for adversity before a distribution cut would be in the cards.

There's just one small problem: Enterprise is a slow-growth business, and the stock has risen a huge 60% or so in just the past five years. But don't let that put you off.

The rise over the past five years comes after a deep decline during the economic shutdowns that were used to slow the spread of the coronavirus in 2020. That was likely an overreaction, noting that the world has quickly gotten used to living with COVID. That said, it is also important to remember the regular distribution increases that have taken place.

The last time Enterprise's units were trading hands at the current levels, its yield was a far less generous 4% or so. Today, despite the energy business' unit price rally, the yield is 6.8% thanks to its reliable distribution increases. The rise in price not only represented a recovery from an unusual exogenous shock, but also the increase in the distribution.