The Best Energy Stock to Buy With Oil Near $105 Isn't an Oil Producer

Enterprise Products Partners (NYSE: EPD) operates in the energy sector, but oil prices aren't the main determinant of its success. That's an important distinction today as you consider energy stocks, with oil prices trading around $105 per barrel. It wasn't too long ago that oil was less than half that. Here's how Enterprise avoids the commodity risk that buying an energy producer would expose you to.

Enterprise is "stuck" in the middle

The broader energy sector is generally broken into three parts: the upstream (production), the midstream (pipelines), and the downstream (chemicals and refining). The upstream and the downstream are heavily impacted by commodity prices. The midstream simply connects the upstream to the downstream and the rest of the world. Midstream businesses like Enterprise charge fees for the use of their energy infrastructure assets, so the volume flowing through their systems is more important than the price of what is being moved.

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Compared to the upstream and the downstream, the midstream is actually pretty boring. And Enterprise is one of the most boring midstream operators around. While it is among the largest pipeline businesses in North America, it has long focused on slow and steady growth. That's highlighted in its distribution, which has increased annually for 28 years. That's basically as long as it has been publicly traded.

Distribution growth tends to be in the low- to mid-single digits, but slow and steady is hard to complain about in a sector known for volatility. Meanwhile, Enterprise has an investment-grade-rated balance sheet, and its distributable cash flow covered its distribution by 1.7x in 2025. There is material room for adversity before a distribution cut would be considered here. And it has $6.5 billion in capital investment planned through 2029, so more slow-and-steady growth is a far more likely outcome.

Enterprise's yield is the big story

All that said, the single factor likely to be most interesting to investors is Enterprise's roughly 6% distribution yield. That's six times what you would get from the broader market today. While upstream and downstream investments rise and fall along with oil prices, you can comfortably sit back and collect a well-above-market yield that has grown steadily for decades. If history is any guide, oil prices will eventually fall from their lofty levels after the geopolitical conflict in the Middle East ends. If you own Enterprise, you probably won't care all that much if they do.

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool recommends Enterprise Products Partners. The Motley Fool has a disclosure policy.