Enterprise Products Partners(NYSE: EPD) is an income investor's dream. The master limited partnership (MLP) offers a steadily growing high-yielding payout and has increased its 6.9%-yielding distribution annually for a quarter-century, including by 5.1% over the past year.
That growth should continue. The MLP recently completed a couple of expansion projects and added a new one to backfill its backlog, giving it even more fuel to grow its payout in the future.
Topping off the tank
Enterprise Products Partners recently completed construction and started commercial service on its Mentone 3 natural gas processing plant in the Delaware Basin. The plant can process 300 million cubic feet of natural gas per day and extract more than 40,000 barrels of natural gas liquids (NGLs) per day from that gas.
Meanwhile, the company finished the construction and began commercial service at its Leonidas natural gas processing plant on the Midland side of the Permian Basin, which has the same capacity as Mentone 3. The company has secured minimum volume commitments from regional producers to support these plants. As a result, they should produce steady fee-based cash flow as they process natural gas for customers.
The MLP has several more natural gas processing plants coming behind those two new facilities. In the Delaware Basin, it's building Mentone West 1, which should start service in the second half of next year. Meanwhile, it's building Orion in the Midland, with a similar projected in-service date.
On top of that, Enterprise Products Partners recently approved plans to build an additional plant in the Delaware Basin: Mentone West 2. It will have a similar capacity as the others and should start commercial service in the second quarter of 2026. That new plant further extends the MLP's earnings growth visibility.
Plenty of growth is coming down the pipeline
With the addition of Mentone West 2, Enterprise Products Partners now has $6.5 billion of major projects currently under construction. The company has projects scheduled to come online through 2026, giving it lots of visibility into its near-term earnings growth:
Image source: Enterprise Products Partners.
As that slide shows, the company expects to spend at least $3.25 billion on approved growth capital projects this year, another $3 billion in 2025, and at least $750 million in 2026. The slide also notes that the company could spend as much as $3.75 billion on capital projects at the upper end of its range this year and between $2 billion and $2.5 billion in 2026. It has several potential expansion projects under development, including a large-scale offshore oil terminal.
On top of organic expansion, Enterprise Products Partners has the financial flexibility to make accretive acquisitions to further enhance growth, thanks to its elite balance sheet. It has a long history of making value-enhancing deals. For example, earlier this year, it agreed to acquire $400 million of assets from fellow MLP Western Midstream Partners(NYSE: WES).
It's buying Western's 15% interest in Panola Pipeline Company for $25 million, boosting its interest to 70%. It also bought Western's 20% interest in Whitehorn Pipeline Company and its 25% interest in EF78 for a combined $375 million.
Those deals boosted its ownership in those assets to 100%. These acquisitions enabled Enterprise to increase its stake in existing assets, which will grow its cash flow. Meanwhile, the sales enabled Western Midstream to sell non-core assets to strengthen its financial foundation so that it could return more cash to investors.
A steady income grower
Enterprise Products Partners has an excellent track record of growing its high-yielding distribution, and that seems very likely to continue. The company continues to complete expansion projects while adding new ones to its backlog.
On top of that, it supplements its organic growth with smart acquisitions. With plenty of fuel to continue increasing its distribution, Enterprise Products Partners remains an excellent option for those seeking a steadily rising passive income stream.
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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.
