High Dividend Stocks: Enterprise Products Partners L.P. (NYSE:EPD)
By: Ned Piplovic,
In addition to above-average yields and long streaks of rising dividend payouts, high-dividend stocks in this analysis must also deliver positive total returns over the trailing 12-month period. Enterprise Products Partners delivers on all those accounts. With nearly two decades of consecutive annual dividend boosts, a 6%-plus dividend yield and a total return of nearly 10% over the past year, Enterprise Products Partners fits easily into the high-dividend stocks category.
For this consideration, the high-dividend stocks are securities that offer dividend yields in excess of 5% as well as meet few additional requirements. While a good initial indicator of the company’s dividend income payouts, dividend yield can be misleading on its own. Without considering other aspects of the equity’s performance a sharp dividend yield increase might seem like a sign to invest in an equity. If a dividend payout increase drives the yield surge, that is indeed a positive sign for investors to consider investing.
Alternatively, if a sudden share price decline is the driver behind the yield upsurge, investors should be very cautious. However, a yield increase due to share price drop might be an investment opportunity in some instances. If a detailed analysis of the equities fundamentals and financial performance indicates that the price drop might be only temporary, some investors might use the opportunity to take a new position or expand their existing position in a particular equity at a discount. However, investors must understand that once the stock recovers from that temporary price drop, the yield will decline back to the pre-surge levels.
Enterprise Products Partners L.P. (NYSE:EPD)
Founded in 1968 and based in Houston, Enterprise Products Partners L.P. provides midstream energy services to producers and consumers of natural gas, natural gas liquids (NGLs), crude oil, petrochemicals and refined oil products. The company operates through four business. The NGL Pipelines & Services segment offers natural gas processing and related NGL marketing services, operates approximately 20,000 miles of pipelines, 15 NGL fractionators and a liquefied petroleum gas and ethane export terminal. Additionally, the Crude Oil Pipelines & Services segment operates approximately 5,400 miles of crude oil pipelines, crude oil storage and marine terminals located in Oklahoma and Texas, as well as a fleet of 440 tractor-trailer tank trucks. Furthermore, the Natural Gas Pipelines & Services segment operates another 20,000 miles of natural gas pipelines in Colorado, Louisiana, New Mexico, Texas and Wyoming. The Petrochemical & Refined Products Services segment operates propylene fractionation and related operations, including approximately 700 miles of pipelines, a butane isomerization complex and octane enhancement production facilities. Additionally, the segment operates approximately 4,500 miles of refined products pipelines.
High Dividend Stocks: Enterprise Products Dividends
Enterprise Products Partners’ current $0.438 quarterly dividend distribution is 0.7% higher than the $0.435 distribution from the previous period. This new quarterly distribution is equivalent to a $1.752 annualized payout and a 6.1% forward dividend yield. The company’s current yield is more than 7% above the Enterprise Products Partners’ own five-year yield average of 5.68%.
In addition to outperforming its own five-year average, Enterprise Products’ yield also outperformed the 2.4% simple average yield of the entire Basic Materials sector by nearly 155%. Furthermore, EPD’s current yield is also 162% above the 2.32% average yield of the company’s peers from the Independent Oil & Gas industry segments. Moreover, Enterprise Products’ current yield also outperformed by nearly 17% the relatively high 5.2% average yield of the segment’s only dividend-paying equities.
The company initiated dividend distributions in the last quarter of 1998 and has boosted its annual payout every year since 2000. Over the past 20 years, Enterprise Products enhanced its total annual dividend payout nearly four-fold. That level of advancement corresponds to an average a growth rate of 7% per year.
Furthermore, the company has boosted its quarterly dividend payout amount every period since October 2004. After 59 consecutive quarterly hikes, the quarterly payout amount rose more than 120%, which is equivalent to an average growth rate of 1.4% every quarter for nearly 15 years.
High Dividend Stocks: Enterprise Products Share Price
The share price experienced a sharp drop in 2015. However, the spike between late-2012 to the all-time high price of more than $41 in September 2014 appears higher than the stock’s long-term growth rate. Without the price spike, the current share price is right on the company’s linear growth trend over the past two decades.
While the above-average yield and quarterly dividend hikes are the main draw of the Enterprise Products stock, the company also delivered moderate asset appreciation during the trailing one-year period. The share price began the trailing 12-month period with a 7% gain to reach its 52-week high of $29.91 on July 26, 2018. After peaking in late July, the share price leveled off and then dropped more than 20% under the pressure of the overall market correction in late 2018 to its 52-week low of $23.51 by December 24, 2018.
Since bottoming out on Christmas Eve, the share price rose to recover 83% of its losses in late 2018 and closed on June 19, 2019 at $28.84 — just 3.6% short of the 52-week high from July 2018. The June 2018 closing price market a 3.3% one-year gain and a 22.7% gain from the 52-week low in late December 2018. However, the June 19 closing price was 26% lower than it was five years ago.
Even the steadily rising dividend income could not overcome fully the share price deficit and shareholders came 0.6% short of breaking even on their investment over the past five years. However, with the share price recovery in 2019, the company delivered a 9.5% total return over the trailing 12 months and a total return of nearly 22% over the past three years.
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