This 6.5%-Yielding Dividend Stock Is Coming Off a Record Year and Has Plenty of Fuel to Continue Growing

Enterprise Products Partners (NYSE: EPD) recently reported its fourth-quarter and full-year results for 2024. The master limited partnership (MLP) posted record financial results fueled by record volumes across its midstream network. That gave it the wherewithal to increase its distribution by another 5%, pushing its payout to its current yield of around 6.5%. That also brought its streak of annual distribution hikes to 26 straight years.

The high-yielding MLP expects to build on that record year in 2025. Here's a look at what powered its strong showing in 2024 and what's ahead for the midstream giant.

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One for the record books

Enterprise Products Partners produced a record $7.8 billion of distributable cash flow last year, a $200 million increase from 2023's level. Its adjusted cash flow from operations was even higher at $8.6 billion, a 6% increase from the prior year. The company used a portion of its cash flow to pay its lucrative distribution. Its distributable cash flow covered its payout by a comfortable 1.7 times. That enabled it to retain $3.2 billion of cash to help fund its expansion program.

It spent a total of $5.5 billion on capital investments last year, including $3.9 billion for growth projects, $949 million to acquire Pinon Midstream, and $667 million for sustaining capital projects. Even with those heavy outlays, Enterprise Products Partners maintained an elite balance sheet. It ended the year with a leverage ratio of 3.1. While that was slightly higher than its target of around 3.0, it supported the company's strong credit rating, which is the highest in the midstream sector.

"Our record 2024 financial performance was driven by record volumes across our midstream system," stated co-CEO Jim Teague in the fourth-quarter earnings press release. He noted that the company set volume records across the following areas:

• Natural gas processing inlet volumes of 7.4 billion cubic feet per day, a 10% increase from 2023.
• Total equivalent pipeline volumes of 12.9 million barrels per day, a 6% increase compared to 2023.
• NGL (natural gas liquids) fractionation volumes of 1.6 million barrels per day, a 3% increase compared to 2023.
• Marine terminal volumes of 2.2 million barrels per day, a 6% increase from 2023.

"The volume growth across our system was largely attributable to natural gas and NGL volume growth associated with our investments in Permian Basin infrastructure and our downstream value chain," said Teague. The company completed several major capital projects last year and enhanced its system by acquiring Pinon Midstream.

More growth is coming

Teague said that the company anticipates the opportunities to expand its midstream system "continuing for the next several years." He noted:

We currently have approximately $7.6 billion of major growth capital projects under construction. These projects will go into service over the next three years. Substantially all of these projects are related to our natural gas and NGL businesses serving the Permian Basin and related expansions to our downstream infrastructure to support growing domestic and international demand. These projects are supported by long-term contracts and provide visibility to continuing net income and cash flow per unit growth.

The bulk of those projects ($6 billion) will enter commercial service throughout 2025. Teague specified that the company expects to complete "two natural gas processing plants in the Permian Basin, our Bahia NGL pipeline, Fractionator 14, the first phase of our NGL export facility on the Neches River, and expansions of our ethane and ethylene marine terminals on the Houston Ship Channel." He further noted that these projects will grow the MLP's cash flow to support future distribution increases. It has already raised its payout once this year.

The company currently expects to invest between $4 billion and $4.5 billion in its capital project backlog this year. That spending level is on track to moderate to a range of $2 billion to $2.5 billion next year, based on the projects currently under construction or development. However, it doesn't include the potential capital spending related to its proposed Sea Port Oil Terminal. This project could add to its capital spending and extend the company's growth outlook if approved.

A high-yielding and steadily rising income stream

Enterprise Products Partners is coming off a record year. Given all the growth it has coming down the pipeline, it should continue to set new records from here. Its expansion projects should grow its cash flow over the next few years, giving management the ability to continue boosting its high-yielding distribution. Because of that, the MLP remains an excellent option for investors who are seeking lucrative and steadily rising income streams (and who don't mind receiving a Schedule K-1 Federal Tax Form each year).

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Matt DiLallo has positions in Enterprise Products Partners. The Motley Fool recommends Enterprise Products Partners. The Motley Fool has a disclosure policy.