Invest Like Warren Buffett: Is This Pipeline Stock and Its 6.9% Yield Right for Your Income Portfolio?

Warren Buffett is the long-time CEO of the conglomerate Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B). His stock-buying prowess is legendary and many investors follow his portfolio moves closely, hoping to get some great ideas to help them direct their investing efforts.

One of the easiest investment ideas to glean from Berkshire's business portfolio is buying midstream stocks. But when you make those purchases, you might want to make sure you do it the Buffett way. Here's a 6.9%-yielding option that looks like it could be the right fit for most income portfolios.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »

What does Warren Buffett invest in?

Warren Buffett's investment approach isn't exactly complex. He generally prefers to buy well-run companies when they are trading at attractive prices. Then he holds them for the long term, allowing Berkshire Hathaway and its shareholders to benefit from the growth of the businesses. That's something that's easy to say but hard to do.

Image source: Getty Images.

For starters, Buffett has invested in a lot of different businesses. Not only does Berkshire Hathaway have a portfolio of publicly traded stocks, but the conglomerate also fully owns nearly 200 controlled businesses. The industries in which Buffett (through Berkshire) has invested are broad and far reaching, but there are a few that get broken out on the balance sheet because of their size. That includes insurance, railroads, utilities, and energy.

Energy is an interesting one because of the inherent volatility of the sector. However, the companies that Berkshire Hathaway has bought in their entirety are largely from the midstream segment of the sector. Midstream companies own the energy infrastructure, like pipelines, that helps to move oil and natural gas around the world. These businesses usually charge fees for the use of their assets, so the price of oil and natural gas isn't as important as it would be for an oil and natural gas driller.

Given the importance of these energy commodities to the world, midstream businesses tend to generate very reliable cash flows through the entire energy cycle. That sounds exactly like the type of thing Buffett would want to own.

Enterprise Products Partners is high-yield and reliable

You can easily invest in the midstream sector yourself, but you'll want to do it with a Buffett-like selection. Enterprise Products Partners (NYSE: EPD) should be your first stop. This master limited partnership (MLP) is one of the largest midstream companies in North America, and it has a lofty 6.9% distribution yield.

Being large and having a high yield aren't enough to make Enterprise a buy. There is also business reliability and growth, as evidenced by 26 consecutive annual distribution increases. But that isn't the whole story, either.

That reliable dividend is backed by an investment-grade-rated balance sheet. And the MLP's distributable cash flow covered the distribution by 1.7 times in 2024. There is a lot of room for managing adversity before a distribution cut would be in order here. And, if you are comparing it to other midstream choices, it happens to be one of the most conservatively financed businesses in the midstream sector. That's highlighted by a debt-to-EBITDA (earnings before interest, taxes, depreciation, and amortization) ratio that is near the bottom of its closest peer group.

Data by YCharts.

The distribution yield will likely make up the lion's share of an investor's return in Enterprise over time. That probably won't bother most income investors. But you can still expect slow and steady growth, noting that Enterprise has $7.6 billion worth of capital investment projects underway.

Enterprise is an easy Buffett-like pick in the midstream sector

Enterprise isn't going to be an exciting investment, but that's pretty much the point. Buffett tends to favor reliable businesses, and Enterprise is a very reliable business. If you buy it you'll get to collect a well-above-market 6.9% yield that is highly likely to keep growing just like it has for more than a quarter of a century. This high-yield midstream giant could be a cornerstone investment for you, just like midstream investments are a cornerstone of Berkshire Hathaway's portfolio.

Should you invest $1,000 in Enterprise Products Partners right now?

Before you buy stock in Enterprise Products Partners, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Enterprise Products Partners wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $496,779!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $659,306!*

Now, it’s worth noting Stock Advisor’s total average return is 787% — a market-crushing outperformance compared to 152% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of April 10, 2025

Reuben Gregg Brewer has positions in Enbridge. The Motley Fool has positions in and recommends Berkshire Hathaway, Enbridge, and Kinder Morgan. The Motley Fool recommends Enterprise Products Partners and Tc Energy. The Motley Fool has a disclosure policy.