Is Enterprise Products Partners Stock a Buy Now?

Enterprise Products Partners (NYSE: EPD) is off to a lackluster start to 2025. Units of the master limited partnership (MLP) have declined by nearly 10% from their 52-week high. That's partially due to its lackluster first-quarter results, as the company's adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) and its adjusted cash flow from operations are down slightly compared to the year-ago period. That didn't sit well with a market that highly values growth.

While the company's growth engine stalled last quarter, it should rev back up again in the coming months. Meanwhile, the MLP's distribution yield is now up to 6.8% following the slump in its unit price. That combination of growth and income at a lower price makes Enterprise Products Partners look like a compelling investment opportunity right now.

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A rock-solid income stream

Enterprise Products Partners is a cash flow machine. The company produced $2.1 billion in adjusted cash flow from operations during the first quarter and $8.6 billion over the past year. It produces very stable cash flow, with most of it backed by long-term contracts and government-regulated rate structures.

It has paid out 56% of that money to investors through distributions and unit repurchases over the past year. That has enabled it to retain about $4 billion in excess free cash flow to invest in expansion projects and maintain a strong financial profile.

The company ended the first quarter with a 3.1 leverage ratio. While that was just above its target ratio of around 3.0, Enterprise Products Partners still has the highest credit rating in the energy midstream sector.

The MLP's robust cash flows and balance sheet strength have given it the flexibility to continue increasing its distribution. It has raised its payout by 3.9% over the past year. That has extended its distribution growth streak to 26 years in a row.

The company's strong financial profile and robust cash flows put its high-yielding distribution on a rock-solid foundation. Investors can bank on a nearly 7% annual return from income alone.

A growth resurgence

While Enterprise Products Partners' earnings and cash flow declined during the first quarter, its financial results should resume their growth trajectory in the future. The company has $6 billion of major organic growth projects scheduled to enter commercial service and start generating cash flow this year. Co-CEO Jim Teague ran through the list in the first-quarter earnings press release. He noted that its projects "include two natural gas processing plants in the Permian Basin in the third quarter, Mont Belvieu area NGL [natural gas liquid] fractionator 14 in the third quarter, the first phase of our NGL export facility on the Neches River in the third quarter, our Bahia NGL pipeline in the fourth quarter, and enhancements at our Morgan's Point marine terminal on the Houston Ship Channel in the fourth quarter."

The MLP has more growth projects beyond that list. It ended the first quarter with a total of $7.6 billion of growth capital projects under construction, which included several projects with 2026 in-service dates. They include the second phase of its Neches River Terminal, an expansion of its Enterprise Hydrocarbons Terminal, and another gas processing plant in the Permian Basin. Meanwhile, the company has an incremental $700 million in growth capital projects under development that it could build over the next two years. That fuels its view that it could invest $4 billion to $4.5 billion on growth capital projects this year and another $2 billion to $2.5 billion in 2026.

Enterprise Products Partners has ample financial flexibility to continue investing in expanding its operations. As opportunities arise, it can build additional organic expansion projects and make accretive acquisitions. Meanwhile, with its free cash flow on track to rise significantly next year, it will have more flexibility to return additional money to investors through continued distribution increases and unit repurchases.

A great buy for income and upside potential

Enterprise Products Partners offers investors a prodigious income stream as long as they're comfortable receiving the Schedule K-1 Federal Tax Form the MLP sends them each year. On top of that, it offers visible upside potential from the growth it has coming down the pipeline. Those factors could give it the fuel to produce an attractive total return from its currently lower price point, making it look like a compelling buy right now.

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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.