Thoughts on Enterprise GP and Enterprise Products
Enterprise Products Partners (EPD) increased its cash distribution rate today to $0.53 per unit - 6% above the $0.50 per unit this quarter last year. That's not a lot in absolute terms but it speaks well of the partnership that it's been able to raise distributions in this sort of market. I think we'll eventually see that the drastic sell-off on MLPs has been overdone.
EPD's good fortunes bode well for Enterprise GP Holdings (EPE), one of my largest holdings. EPE is essentially a leveraged bet on the fortunes of EPD, Energy Transfer Partners and Teppco; EPE owns stakes in the general partners of the latter two and is the general partner of EPD. I believe that these three MLPs have stable underlying assets and that EPE will be able to grow its cash distribution rate even now. Given the fact that EPD has been raising cash, I wouldn't be surprised to see EPE make more acquisitions. I think of it as a closed-end fund for the MLP industry. EPE itself is yielding over 9% at today's prices.