I first initiated a place in Enterprise Merchandise Companions (EPD 0.16%) greater than two years in the past. How has that funding fared to this point? Not unhealthy. The midstream vitality firm has generated a complete return of roughly 45%.

Granted, that efficiency lags behind the S&P 500‘s whole return of 56% throughout the identical interval. Nevertheless, one factor I might rely on, rain or shine, with Enterprise Merchandise Companions was (and is) its juicy distribution.

How does the inventory look at the moment? Absurdly good, for my part.

Picture supply: Getty Photographs.

An revenue investor’s dream inventory

Initially, Enterprise Merchandise Companions is an revenue investor’s dream inventory. It at present affords a ahead distribution yield of 6.7%. The grasp restricted partnership (MLP) would not have to provide a lot in the way in which of unit worth appreciation to ship a strong whole return.

What’s extra, Enterprise boasts an impressive observe document of distribution hikes. The corporate has elevated its distribution for 26 consecutive years. It has additionally paid $1.2 billion in “invisible” distributions since its preliminary public providing in 1998 through unit buybacks.

Constructing this spectacular document wasn’t straightforward. Enterprise Merchandise Companions confronted a number of massive challenges via the years, together with the monetary disaster of 2007 via 2009, the oil worth collapse of 2015 via 2017, and the COVID-19 pandemic of 2020 via 2022. Nevertheless, it was capable of generate robust money circulate per unit to fund its distributions throughout each disaster.

Some rivals had been pressured to resort to promoting property to cowl their distributions throughout robust durations. Not Enterprise Merchandise Companions. It is the one midstream vitality firm that has been capable of develop its adjusted money circulate from operations (CFFO) per unit and cut back unit rely with none materials asset gross sales.

Immediately, Enterprise Merchandise Companions operates greater than 50,000 miles of pipeline. It owns 43 pure fuel processing trains and 26 fractionators, which separate the parts of hydrocarbons. As well as, the MLP can retailer over 300 million barrels of liquids and has 20 deepwater docks.

Extra to the story

I discussed earlier that Enterprise Merchandise Companions’ whole return hasn’t been as excessive because the S&P 500’s since I purchased it. If we appeared again during the last 5 years, although, it might be a unique story. Enterprise has additionally narrowly outperformed the S&P 500 in whole return to this point in 2025.

The MLP’s distribution is not the one cause behind its market-beating whole returns. The rising demand for U.S. hydrocarbons, particularly pure fuel liquids (NGLs), has performed a key position as effectively. I believe these demand tendencies will prolong effectively into the longer term.

Manufacturing of oil, NGLs, and pure fuel is projected to extend steadily via the tip of this decade. Synthetic intelligence (AI) is a vital driver behind the upper demand for pure fuel. The info facilities that host AI fashions require huge quantities of electrical energy, and pure fuel is an efficient choice to gasoline the ability vegetation that serve these knowledge facilities. As well as, LNG demand in Asia and Europe is predicted to rise by roughly 30% by 2030.

Enterprise is effectively positioned to capitalize on the demand development. The MLP has $7.6 billion in main capital initiatives underway, with $6 billion of those initiatives projected to come back on-line this yr. Additionally it is hitting the bottom to create extra alternatives: Enterprise’s workers have visited over 20 worldwide cities to spice up export development.

A lovely valuation, too

What extra might buyers need than an ultra-high-yield distribution and strong development prospects? A lovely valuation. Enterprise Merchandise Companions has that, too.

The MLP’s models commerce at 11.2 occasions ahead earnings. That is the lowest ahead earnings a number of in its peer group. It is also effectively under the S&P 500 vitality sector’s ahead price-to-earnings ratio of 15.9. I believe Enterprise Merchandise Companions simply qualifies as an absurdly good inventory to purchase proper now.