InvestWize Top Dividend Long-Term Play!!!
- Chris Powell
- Mar 15
- 7 min read
Key Points
Research show EPD scores 26% on the InvestWize BUY % system, indicating a moderate DCA long-term investment, especially for dividend seekers.
It seems likely that EPD is a strong dividend play, with a 7.51% yield and 25 years of consecutive distribution growth.
The evidence leans toward EPD’s stability in the midstream energy sector, with a low beta of 0.39, making it suitable for dollar-cost averaging (DCA) over time.
Reinvesting $1,000 in EPD over 5 years, assuming the stock doubles, could grow to approximately $2,557, significantly boosted by dividends.
Introduction
Enterprise Products Partners L.P. (EPD), a master limited partnership in the midstream energy sector, has established itself as a key player in transporting and processing natural gas, natural gas liquids (NGLs), crude oil, refined products, and petrochemicals around the country and for import/export purposes. With operations spanning most producing regions in the Lower 48 states, EPD is particularly dominant in the NGL market. This analysis, conducted as of March 9, 2025, evaluates EPD using the InvestWize scoring system, focusing on its potential as a top dividend long-term play, and includes a detailed examination of the impact of a $1,000 investment with dividend reinvestment, assuming the stock doubles over time.
Company Background
EPD, founded in 1998 by Dan L. Duncan and headquartered in Houston, Texas, trades on the NYSE under the ticker EPD. It operates through four segments: NGL Pipelines & Services, Crude Oil Pipelines & Services, Natural Gas Pipelines & Services, and Petrochemical & Refined Products Services. Recent financial highlights include a record net income of $5.9 billion for 2024, with an EPS of $2.69, and a market capitalization of approximately $67.5 billion. The stock’s 52-week range is $26.23 to $34.43, with a current price around $31.14 to $33.45, and an average trading volume of 3.96 million shares daily over the past three months.
Energy Midstream Sector Update
The U.S. midstream sector develops and operates the infrastructure that moves oil, gas, refined products, and petrochemicals around the country and for import/export purposes. I conceptually separate the industry into three main periods of time:
The Boom Phase (1990s to 2014): This was when the industry was rapidly growing, and they were constantly issuing equity and debt to finance that growth, which the master limited partnership structure was built to encourage.
The Bust Phase (2015 to 2020): The energy sector experienced a major bear market as unprofitable shale oil flooded the market, and even the midstream sector was hit hard because they were so reliant on constantly issuing equity and debt at high valuations, and thus ran into crises when demand for their equity and debt issuance dried up. Some of the best operators saw this coming ahead of time so they began shifting toward self-financing models ahead of time, while others ran into the problem head-first and had to cut distributions and quickly fix their capital structures.
The Recovery and Capital Return Phase (2020 to the present): This is when the industry has moved past its boom/bust phase, and is now in maintenance mode. Midstream businesses have slower growth, but trade at lower valuations and are more self-financing now, meaning that many of them are not constantly issuing equity to fund growth, and some of them are even buying back their units. Most of them have eliminated their incentive distributions rights, and some of them have converted from MLPs to corporations.
The blue chip standard in the industry is Enterprise Products Partners (EPD). They’re one of the largest, they have the best credit rating, and they were one of the businesses that gradually shifted their capital structure ahead of time and thus were able to grow their distributions per unit for 25 consecutive years through all of these phases including the bust phase. With EPD, we can reasonably earn a 7% distribution yield and 2-5% annual distribution growth, which can give us 9%-12% total returns with fairly high clarity. On top of that fundamental return engine, valuations will of course fluctuate. Even with no real top-line growth, if the business just raises prices in line with inflation, replaces aging infrastructure with new infrastructure, and returns the majority of remaining cash flows to investors via distributions (primarily) and buybacks (secondarily), then they can likely achieve the low end of this return range. Any mild growth on top of that would be a nice-to-have.
InvestWize Scoring System Analysis
The InvestWize system evaluates EPD across five categories, each weighted at 20% for the final BUY % score. Below, we detail the scoring for each category based on available data.
Balance Sheet (Score: 3/5)
Current Ratio: Approximately 0.92, based on recent financial reports EPD Financials WSJ, which is less than 1.5, earning a score of 1-2. We assign 2.
Debt-to-Equity Ratio: Calculated as 1, falling between 0.5 and 1, earning a score of 3-4. We assign 3, based on earnings call data indicating total debt of $28.5 billion and equity of $28.5 billion.
Altman Z-Score: 2.03, as per GuruFocus Altman Z-Score EPD, between 1.8 and 3.0, earning a score of 3-4. We assign 3.
Free Cash Flow (FCF): Adjusted FCF for 2024 was $1.4 billion, down from $3.0 billion in 2023, indicating fluctuating but positive, earning a score of 3-4. We assign 3, based on earnings call transcripts.
Average Score: (2 + 3 + 3 + 3) / 4 = 2.75 ≈ 3.
Business Quality (Score: 3/5)
Return on Equity (ROE): 27.75%, greater than 20%, earning a score of 5, based on MacroTrends ROE.
Gross Margin: 12.63%, less than 30%, earning a score of 1-2. We assign 2, from Stock Analysis Statistics EPD.
Market Share Trends: Given EPD’s dominance in NGL markets and recent expansions, we assume stable share, earning a score of 3-4. We assign 3.
Revenue Growth Rate (3-5 years): Calculated a 3-year CAGR of approximately 12% from 2021 to 2024, between 5% and 15%, earning a score of 3-4. We assign 3, using revenue data from MacroTrends Revenue EPD.
Average Score: (5 + 2 + 3 + 3) / 4 = 3.25 ≈ 3.
Management Quality (Score: 3/5)
Founder-Led Status: Founder Dan L. Duncan passed away in 2010, not actively involved, earning a score of 1-2. We assign 2.
CEO Tenure and Track Record: CEO Michael J. Jordan, in role since 2016, over 5 years with strong growth, earning a score of 5.
R&D Spend as % of Revenue: Less than 5%, based on 2023 general and administrative expenses of $241 million versus revenue of $53.9 billion, earning a score of 1-2. We assign 2.
Insider Ownership: 0.90%, less than 5%, earning a score of 1-2. We assign 2, from GuruFocus Insider Ownership EPD.
Employee Ratings (Glassdoor): Rating of 4 out of 5, within 4.0–4.5, earning a score of 3-4. We assign 3, from Glassdoor Enterprise Products.
Average Score: (2 + 5 + 2 + 2 + 3) / 5 = 2.8 ≈ 3.
Valuation (Score: 3/5)
Price-to-Earnings (P/E) Ratio: 11.68, near industry average (around 12-15 for peers like KMI and WMB), earning a score of 3-4. We assign 3.
Price-to-Sales (P/S) Ratio: 1.19, less than industry average (peers like KMI at 3.33), earning a score of 5.
PEG Ratio: 3.68, greater than 2, earning a score of 1-2. We assign 2, calculated as P/E divided by 3.17% earnings growth rate.
Dividend Yield: 7.51%, near industry average (e.g., ET at 8%, KMI at 6.5%), earning a score of 3-4. We assign 3.
Average Score: (3 + 5 + 2 + 3) / 4 = 3.25 ≈ 3.
Investwize Oversold/Overbought Score (Score: 1/5)
Given as 22.7%, less than 30%, earning a score of 1.
Final InvestWize BUY % Score
Each category is 20%:
Balance Sheet: 3 → 0.6
Business Quality: 3 → 0.6
Management Quality: 3 → 0.6
Valuation: 3 → 0.6
Investwize Score: 1 → 0.2 Total: 0.6 + 0.6 + 0.6 + 0.6 + 0.2 = 2.6 → 26% Buy Score.
Dividend Reinvestment Impact Analysis
To illustrate EPD’s potential as a long-term dividend play, consider a $1,000 investment at $32 per share, buying approximately 31.25 shares. With an annual dividend of $2.40 per share (7.51% yield), paid quarterly, and assuming the stock doubles to $64 over 5 years (14.87% annual growth rate), we calculate the growth with dividend reinvestment:
Year | Stock Price at End | Shares at Start | Dividend Paid | New Shares Bought | Total Shares | Total Value |
0 | $32.00 | 31.25 | - | - | 31.25 | $1,000.00 |
1 | $36.76 | 31.25 | $75.00 | 2.04 | 33.29 | $1,223.87 |
2 | $42.22 | 33.29 | $79.90 | 1.89 | 35.18 | $1,484.80 |
3 | $48.48 | 35.18 | $84.43 | 1.74 | 36.92 | $1,789.99 |
4 | $55.67 | 36.92 | $88.61 | 1.59 | 38.51 | $2,143.87 |
5 | $64.00 | 38.51 | $92.42 | 1.44 | 39.95 | $2,556.80 |
Without reinvestment, the value would be $2,000 at year 5. The reinvestment adds approximately $557, showcasing the compounding effect.
Final Thoughts: EPD Breakout
For a spot of good news in the energy sector, my favorite income investment has finally broken out above its $30 resistance. EPD is a leading midstream partnership, with vast transportation infrastructure for oil, natural gas, natural gas liquids, and petrochemicals. Their A- credit rating by S&P gives them the highest credit rating in the midstream sector, and they have 25 years of consecutive annual distribution growth through the various booms and busts of the American oil and gas industry. They’ve been chopping along and steadily increasing in share price in recent years while paying out a 7% yield, so I’ve been comparing them favorably to Treasuries and other income/value type plays. However, $30 served as resistance for a while. Over the past month, the stock finally pushed firmly through $30 and quickly found itself over $32. I continue to be bullish on EPD as an income play for American investors. Starting in 2023, non-American investors were given new tax complications for master limited partnerships like EPD, and so for those investors that can access the Alerian MLP ETF (AMLP), that can serve as a way to access the industry without the tax complications.
Conclusion and Recommendation
With a 26% InvestWize BUY % score, EPD is a moderate investment, particularly appealing for long-term dividend growth. Its 7.51% yield, 25 years of consecutive distribution increases, and low volatility (beta 0.39) make it ideal for DCA strategies. The analysis of a $1,000 investment growing to $2,557 over 5 years with reinvested dividends underscores its potential for income-focused investors. Given its stability and analyst optimism, we recommend a BUY for long-term, dividend-seeking portfolios.
Key Citations
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