Let’s look at a little less traditional energy sources, natural gas liquids. We haven’t posted much about NGL producers, but we want to bring in something a little more interesting. In this case, Enterprise Product Partners are showing who’s boss in the NGL industry. David White gives some details on EPD’s profits.
EPD has $3.9B gross operating margin for the year ended Dec. 31, 2011. Approximately 70% of this was fee based. NGL pipelines and services accounted for 56% of the $3.9B. Onshore natural gas pipelines and services accounted for 18%. Petrochemical and refined products services accounted for 14%. These included: refined products and petrochemical pipelines, butane isomerization facilities, octane enhancement and high purity isobutylene facilities, and marine terminals and transportation.. Onshore crude oil pipelines and services accounted for 6%. Offshore pipelines and services accounted for 6%.
If you add to this EPD’s steady operating margin increases (from $1.8B in 2006 to $3.9B in 2011) and EPD’s steady increases in declared dividends (from $1.83 in 2006 to $2.44 in 2011) you get the picture of a very healthy company. EPD has an excellent dividend of 4.7%, but that pales in comparison to its next five year EPS growth estimate per annum of 30.20%. EPD has a 3-year total return CAGR of 39.9%, a 5-year CAGR of 17.5% (with a recession thrown in), and a 10-year CAGR of 14.4% (with two recessions in the mix).
Interested in NGL? Well, if you want to get in on this industry, EPD may be a good choice. Good profits are a good sign, but be sure to dig deeper. Profits aren’t everything.
Never give a sucker an even break. Oooo, tax structured pass-thru, high dividends, Ooooo, yieldy and safe. Wake up! Just look at the Cashflow Statements. This company and many others in its Peer Group are paying their dividends with Proceeds of New Debt and Issuance of New Stock. Yeah, yeah there is big Depreciation add-back, but look at the Capex. So obvious. Glad I'm short.