EPD - Enterprise Products Partners: The NGL Value Chain Promises Continued Distribution Growth

2024-07-15 08:00:00 ET

Summary

• The NGL value chain represents the bulk of EPD's earning potential.
• Significant growth can be realized from the current projects under construction in the NGL segment.
• EPD should be able to maintain a 5% distribution growth rate through 2028. This will also support capital gains.
• I maintain my BUY rating for income and dividend growth investors.

Thesis

Lately I've seen several narratives that Enterprise Products ( EPD ) will benefit from increased natural gas consumption associated with AI data centers. I am personally not a subscriber to this thesis based on EPD's assets and business model.

So what I decided to do was update my previous thesis, which included the potential impact of the SPOT project . This time around, I analyzed the potential impact of the multiple projects in the NGL value chain. This is EPD's most profitable segment representing 53% of the company's operating margin....

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