Enterprise Products Partners: A Stable MLP Amid Volatility

Enterprise Products Partners is a major midstream energy company that covers all aspects of the energy distribution supply chain. It has a significant asset footprint and is a major player in the industry, similar to other MLPs. The company has a diversified portfolio and is well-positioned to navigate volatile market conditions.

Enterprise Products Partners (EPD) is a major midstream energy company that covers all aspects of the energy distribution supply chain. With a significant asset footprint, EPD is well-positioned to navigate volatile market conditions, making it a key player in the industry, similar to other Master Limited Partnerships (MLPs).

EPD's operations are divided into four key business segments: NGL Pipelines & Services, Crude Oil Pipelines & Services, Natural Gas Pipelines, and Petrochemical & Refined Products Services. The NGL segment, which handles midstream operations for NGLs like Ethane and Propane, has been historically the largest in terms of sales. The Crude Oil Pipelines & Services segment has recently overtaken NGLs as the largest in terms of sales and has been the main growth driver for EPD [1].

EPD's strong balance sheet is a significant advantage during volatile times. The company's A- investment-grade rating and consistent ROIC of over 10% over the past 20 years ensure stable cash flow yields and 24 consecutive years of distribution growth. Despite the recent acquisitions, EPD has maintained a disciplined approach to capital allocation, reducing leverage and dilution [1].

The current geopolitical situation, with the potential supply of Iranian oil decreasing significantly, could benefit EPD. The tightening of global supply could increase demand for U.S. crude, boosting throughput through EPD’s distribution network. However, the company's revenue is primarily driven by fixed fees, which insulates it from price volatility [1].

EPD's expansion in the Permian Basin and infrastructure towards the Gulf Coast, as well as international export infrastructures, are strategic moves. The Permian has become the main growth driver for American energy, with an increasing Gas-Oil Ratio allowing EPD to tap into more gas opportunities. The company's main cash-generative segment, NGLs, is seeing full capacity since the pandemic, and overall U.S. NGL production is rising [1].

Valuation metrics show that EPD currently has an elevated EV/EBITDA ratio of 10.67, around 57% higher than the sector median. However, its strong balance sheet and financial discipline justify this valuation. The company has seen strong revenue growth over the past 3 years at 12.38% CAGR and expects to grow its distribution at around 4% per year while maintaining its current payout ratio [1].

Cambridge Investment Research Advisors Inc. recently increased its stake in EPD by 4.0% in the first quarter, further underscoring the company's attractiveness to institutional investors [2].

In conclusion, Enterprise Products Partners is an example of a company that can weather downturns and make accretive acquisitions while continuously boosting its distribution coverage. Its strong balance sheet and strategic investments position it well for future growth. The current yield of 6.8% makes it an attractive option for income-focused investors.

References:
[1] https://seekingalpha.com/article/4797008-enterprise-products-partners-the-mlp-to-own-in-volatile-times
[2] https://www.marketbeat.com/instant-alerts/filing-cambridge-investment-research-advisors-inc-purchases-27219-shares-of-enterprise-products-partners-lp-nyseepd-2025-06-24/