Why Enterprise Products Partners Is a Better Income Play Than Energy Transfer

While Energy Transfer (ET) offers a higher distribution yield of approximately 8%, Enterprise Products Partners (EPD) presents a better option for income-focused investors due to several factors. Firstly, despite having a slightly lower yield of 7.3%, EPD has consistently increased its distribution annually for the past 25 years, even during periods of economic uncertainty like the 2020 COVID-19 pandemic when oil prices fell below zero. Meanwhile, ET cut its distribution in Q3 2020 by 50%. Secondly, both companies have robust cash flows to support their distributions, but EPD’s distribution coverage ratio was stronger in 2023 at 1.7 times, indicating greater safety and likelihood of future increases. Thirdly, in 2015, ET attempted to back out of a merger with Williams Companies, potentially putting the interests of the CEO over those of its unitholders. This action, along with the distribution cut during the pandemic, raises concerns for investors who rely heavily on their portfolio’s income stream. Therefore, EPD becomes a more attractive choice for such investors. However, before making a purchase, investors must consider other factors that may influence their decisions.