In the last several Monday watchlist installments, I've focused on a wide range of closed end funds to add income to your portfolio. Today, I'm going to switch things up and focus on master limited partnerships (MLPs).
In case you're not familiar with MLPs, they are publicly listed limited partnerships that trade on a national securities exchange. They combine the tax benefits of a private partnership with the liquidity of a publicly traded company.
In the case of an MLP, the general partners manage the day-to-day operations, while the limited partners (that's you and me) purchase shares in the MLP and provide capital in return for cash distributions from the entity's operations.
Most MLPs focus on natural resource-related activities, including oil, gas, coal, timber, and commodities transport, and today's watchlist candidate is no different.
Founded in 1968 and based in Houston, Texas, Enterprise Products Partners L.P. (EPD) is a leading North American provider of midstream energy services to producers and consumers of natural gas, NGLs, crude oil, refined products and petrochemicals.
The partnership's assets currently include more than 50,000 miles of pipelines; over 260 million barrels of storage capacity for NGLs, crude oil, petrochemicals and refined products; and 14 billion cubic feet of natural gas storage capacity.
Its services include: natural gas gathering, treating, processing, transportation and storage; NGL transportation, fractionation, storage and marine terminals; crude oil gathering, transportation, storage and marine terminals; petrochemical and refined products transportation, storage and marine terminals; and a marine transportation business that operates on key U.S. inland and intracoastal waterway systems.
On August 1, 2023, the company reported Q2 2023 results that included revenue of $10.65 billion and distributable cash flow (DCF) of $1.7 billion.
For us, as income investors, it's that second figure (DCF) that we're interested in, because as the name suggests, that's the cash flow that can be distributed to shareholders.
Speaking of which, distributions declared with respect to the second quarter of 2023 increased 5.3% to $0.50 per common unit, or $2.00 per common unit annualized, compared to distributions declared for the second quarter of 2022.
Additionally, the partnerships DCF of $1.7 billion provided 1.6x coverage of the distribution declared with respect to the second quarter of 2023. I like that because it means EPD can increase the distribution in the future. In fact, Enterprise Products has raised its distribution to unit holders for 25 years in a row.
At the current price, EPD is delivering a healthy forward yield of 7.46%. You can't get that in Treasuries or CDs right now, even with higher interest rates, making this an extremely choice income play.
Keep an eye on your inboxes this week for more opportunities, as always.
The post Make This Income Play First Thing Tomorrow When Markets Open appeared first on Total Wealth.
About the Author
Shah Gilani boasts a financial pedigree unlike any other. He ran his first hedge fund in 1982 from his seat on the floor of the Chicago Board of Options Exchange. When options on the Standard & Poor's 100 began trading on March 11, 1983, Shah worked in "the pit" as a market maker.
The work he did laid the foundation for what would later become the VIX - to this day one of the most widely used indicators worldwide. After leaving Chicago to run the futures and options division of the British banking giant Lloyd's TSB, Shah moved up to Roosevelt & Cross Inc., an old-line New York boutique firm. There he originated and ran a packaged fixed-income trading desk, and established that company's "listed" and OTC trading desks.
Shah founded a second hedge fund in 1999, which he ran until 2003.
Shah's vast network of contacts includes the biggest players on Wall Street and in international finance. These contacts give him the real story - when others only get what the investment banks want them to see.
Today, as editor of Hyperdrive Portfolio, Shah presents his legion of subscribers with massive profit opportunities that result from paradigm shifts in the way we work, play, and live.
Shah is a frequent guest on CNBC, Forbes, and MarketWatch, and you can catch him every week on Fox Business's Varney & Co.