This "Boring" Pipeline Stock Has Never Cut Its Dividend. Here's the 1 Number I'd Watch.

Enterprise Products Partners (EPD -0.08%) has raised its quarterly distributions for 29 consecutive years, never once reducing its payout. Despite midstream energy’s steadiness relative to other segments of the energy sector, a track record of zero dividend cuts or suspensions is quite rare among pipeline stocks. Other large pipeline master limited partnerships (MLPs), including Plains All American Pipeline and Energy Transfer, have had to cut their distributions in the past.

A key reason for Enterprise’s strong record is its approach to cash flow distribution. By taking a more cautious approach, this MLP’s unitholders could continue to benefit from its payout consistency.

Pipelines carry fossil fuels from exploration and production sites to refining and processing facilities.

Image source: Getty Images.

Enterprise Products Partners and its well-covered dividend

In its quarterly earnings releases, Enterprise Products provides numerous financial metrics. One to pay particular attention to is the coverage of distributions ratio, which is distributable cash flow divided by distributions. Last quarter, this figure came in at 1.9x.

In other words, the MLP generated distributable cash flow nearly twice the size of distributions. With this high coverage, Enterprise is able to, on one hand, maintain and grow its nearly 5.75% dividend. At the same time, there’s plenty of cash flow on hand to fund growth and expansion, reducing Enterprise Products Partners’ need to borrow or issue additional MLP units.

Enterprise Products Partners

Today’s Change

(-0.08%) $-0.03

Current Price

$39.02

Key Data Points

Market Cap

$84B

Day’s Range

$38.85 – $39.20

52wk Range

$30.01 – $40.16

Volume

Avg Vol

Gross Margin

12.98%

Dividend Yield

5.65%

Keeping an eye on this metric

Enterprise Products Partners is not for all investors. For those seeking stable gains, largely in the form of cash distributions, it’s a solid opportunity. Keep in mind, however, that distribution growth has slowed down in recent years.

Moreover, if you do choose to buy Enterprise Product Partners, be sure to keep an eye on the coverage ratio. Each quarter, management presents this figure. If it starts to materially drop, it could be a sign that Enterprise is deviating from its historical approach, calling into question the sustainability of its future dividend growth.

Thomas Niel has no position in any of the stocks mentioned. The Motley Fool recommends Enterprise Products Partners. The Motley Fool has a disclosure policy.

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Shin JohnYtv Market News

Share-market news writer and analyst with deep experience covering equities, commodities, forex, and cryptocurrencies for readers in the USA, UK, Canada, and Australia. Ytv Market News delivers timely market updates, practical trading insights, and clear explanations of macro and company-level catalysts that move prices. Combines on-the-ground financial reporting with technical analysis, using concise charts and actionable ideas to help investors and traders make smarter decisions.