This Phenomenal 7.4%-Yielding Dividend Stock Starts 2024 Off by Giving Investors Another Raise

Last year was a big milestone for Enterprise Products Partners (NYSE: EPD). The master limited partnership (MLP) hit the quarter-century mark for annual distribution increases. That’s a phenomenal record for any company — and even more so for one that operates in the volatile energy industry.

Enterprise Products Partners wasted no time continuing its distribution growth streak in 2024, unveiling its latest raise this week. Given its financial strength and expansion project backlog, the MLP should have plenty of fuel to continue growing its payout in the future.

A well-supported level

Enterprise Products Partners recently declared its latest distribution. The MLP set its new quarterly rate at $0.515 per unit ($2.06 annualized). That’s 3% above the prior quarter’s rate and a 5.1% increase from the year-ago level.

The pipeline company can easily afford that higher rate, even though its distribution already has a high yield (7.4% before the increase). The MLP generates very stable and steadily growing cash flow, backed by long-term contracts and government-regulated rate structures.

Over the past year, it has produced about $8 billion in adjusted cash flow from operations. Enterprise Products Partners distributed 53% of that money to investors. It retained most of the remaining cash, which was more than enough to fund its capital projects (maintenance and growth).

Enterprise Products Partners’ strategy of using internally generated cash flow to fund expansion projects allowed it to maintain a strong balance sheet. The MLP has an elite credit rating (its A-/A3 bond rating is the highest in the midstream sector) thanks to its low leverage ratio. The company’s leverage was 3.0 times at the end of the third quarter, putting it in the middle of its 2.75-3.25 times target range.

Ample fuel to continue growing

Enterprise Products Partners should have no problem continuing to increase its payout in the future. The MLP’s large backlog of commercially secured expansion projects…