In this video, Chuck Carnevale, co-founder of FAST Graphs, aka Mr. Valuation presents a detailed analysis of Enterprise Products Partners (EPD), a midstream master limited partnership (MLP) known for its high income potential, offering investors a stable and growing dividend yield. With 21 years of consistent dividend increases, Enterprise Products is appealing for those seeking income and growth, although its MLP structure comes with unique tax implications, which should be reviewed with an accountant.
The company’s earnings may not fully cover its dividend, but its strong cash flow from long-term contracts and capital investments, including acquisitions and pipeline expansions, help sustain and grow distributions. Despite the capital-intensive nature of its business, Enterprise Products has maintained its dividend through strategic use of debt and equity without excessively issuing stock. It has a solid balance sheet with an A- credit rating and healthy margins.
Chuck emphasizes the importance of valuation when investing in such income-focused stocks, recommending purchasing during undervalued periods to maximize returns. Currently, Enterprise Products is trading at a price-to-operating cash flow below its historical average, presenting an opportunity for long-term investors seeking high, sustainable yields and modest capital appreciation.
However, investors should consider tax factors and consult their tax advisors when investing in MLPs.
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Disclosure: Long EPD
Disclaimer: The opinions in this document are for informational and educational purposes only and should not be construed as a recommendation to buy or sell the stocks mentioned or to solicit transactions or clients. Past performance of the companies discussed may not continue and the companies may not achieve the earnings growth as predicted. The information in this document is believed to be accurate, but under no circumstances should a person act upon the information contained within. We do not recommend that anyone act upon any investment information without first consulting an investment advisor as to the suitability of such investments for his specific situation.
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