Investors Need to Think About Enterprise Products Partners' Distribution in a Different Way Going Forward
On Jan. 6 Enterprise Products Partners (NYSE: EPD) announced a 3.3% distribution increase. Although well below current inflation rates, that's actually pretty good -- the prior increase was 1.1%, and the one before that was a scant 0.6%. Although the trend here is heading higher, investors shouldn't get too excited. Enterprise's distribution needs to be viewed in a different way than it has been in the past.
The shift toward lower distribution growth at Enterprise has nothing to do with the master limited partnership's ability to pay. It ended the third quarter of 2021 with its distributable cash flow at 1.6 times its distribution rate, which is well above the 1.2 times coverage ratio that has historically been considered strong in the midstream space. That's not new, either -- distribution coverage has been well above 1.2 times since 2018.
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Source Fool.com
