Enterprise Products Partners L.P.(US:EPD) 247Wallst·2026-02-24 12:35Core Viewpoint - Enterprise Products Partners (EPD) is highlighted as a significant player in the midstream energy sector, showcasing a strong distribution yield and a long history of increasing distributions, despite facing challenges in free cash flow coverage due to elevated capital expenditures [1]. Financial Performance - EPD achieved a distributable cash flow (DCF) coverage ratio of 1.8x in Q4 2025, with operational DCF amounting to $2.16 billion [1]. - The annual distribution stands at $2.20 per unit, yielding approximately 6% [1]. - The earnings payout ratio for Q4 is around 73%, which is considered elevated but manageable for a capital-intensive partnership [1]. - Full-year adjusted cash flow from operations reached a record $8.7 billion in 2025, indicating strong operational performance [1]. Distribution History - EPD has increased its distributions for over 26 consecutive years, with the most recent increase being 3.8% year-over-year for Q1 2026 [1]. - The five-year compound annual growth rate (CAGR) for distributions is approximately 3.5% to 4%, reflecting a consistent but not explosive growth pattern [1]. Capital Expenditures and Future Outlook - Free cash flow coverage for 2024 was reported at 0.79x due to high capital expenditures, but management anticipates a significant improvement in discretionary free cash flow to about $1 billion in 2026 [1]. - EPD is currently investing heavily in projects such as the Bahia NGL Pipeline and Permian processing expansion, which are expected to enhance future cash flows [1]. Leverage and Debt Management - As of December 31, 2025, EPD's total debt principal was $34.7 billion, with a net debt-to-EBITDA ratio of 3.3x, which is above the target but manageable [1]. - The company maintains a solid liquidity position with $5.2 billion in consolidated liquidity and approximately 98% of its debt at a fixed rate, insulating it from interest rate fluctuations [1].