Enterprise Products Partner Shares Jump as Cash Flows Climb. Is It Time to Buy the High-Yield Stock?

Core Viewpoint - The pipeline company, Enterprise Products Partners, is expected to see growth accelerate through 2027 after overcoming challenges related to its LPG business and returning to normalized spreads [1][6]. Financial Performance - In Q4, Enterprise's total gross operating profit increased by 4% to $2.74 billion, with adjusted EBITDA also rising by 4% to $2.71 billion [3]. - Distributable cash flow (DCF) rose by 3% to $2.22 billion, while adjusted free cash flow was reported at $1.17 billion [3]. Business Model and Growth Outlook - Approximately 82% of Enterprise's gross operating profit in 2025 is derived from fee-based activities, returning to historical levels after benefiting from high differentials [2]. - The company forecasts adjusted EBITDA and cash flow growth at the lower end of a 3% to 5% range for 2026, with expectations of double-digit growth in 2027 as new projects commence [6]. Capital Management - Enterprise has reduced its capital expenditure budget for 2026 to a range of $2.5 billion to $2.9 billion from $4.4 billion in 2025, potentially generating around $1 billion in discretionary free cash flow in 2026 [6]. - The company maintained a 1.8x coverage ratio for its distribution in Q4 and ended the year with a leverage ratio of 3.3 times [5]. Stock Performance and Dividend - The current market capitalization of Enterprise is $76 billion, with a dividend yield of 6.23% and a forward yield of 6.4%, making it a consistent high-yield dividend stock [4]. - The company paid a quarterly distribution of $0.55 per unit, reflecting a year-over-year increase of 2.8% [5]. Strategic Positioning - With reduced capital expenditures, Enterprise is positioned to utilize discretionary free cash flow for debt reduction, share buybacks, or strategic acquisitions [8]. - The company is expected to continue increasing its distribution for the 28th consecutive year in 2026 [8]. Investment Timing - Given the projected growth ramp-up in 2027, now is considered an opportune time to invest in the stock [9].