It happened again. Another master limited partnership secondary and another win.
This time it is Enterprise Product Partners (EPD) with an 8-million-share secondary priced at $54.56, a deal where about a dozen execs and board members so far have filed that they participated in, all with sizable amounts.
Of course the money will be used to pay down debt so the company can expand once again.
Enterprise Product Partners may be among the shrewdest oil companies in the land. It has major pipe coming in and out of all the important shales: Eagle Ford, Permian, Haynesville, Barnett and Marcellus. It is the pipeline company that has just about the best exposure to the huge petrochemical refineries that crave the natural gas liquids feedstock.
It transports an astounding 4.3 million barrels of natural gas liquids, oil, refined product and petrochemicals a day. And it pays 66 cents per unit each quarter, just giving you a 6.5% increase.
Like many of the mlps, Enterprise can't lay down pipe fast enough, even as its vast network would seem to have pretty much every important field but the Bakken covered.
Enterprise is the outfit that with Enbridge is trying to alleviate the Cushing glut that is causing the bizarre dichotomy between the low West Texas price and the high Brent price. These two companies are already pumping 400,000 barrels a day out of Cushing using the Seaway pipe, which, if you recall, used to go the other way but now that there is so much oil going into Cushing there's no room for the stuff. But there's so much more oil that Enterprise is expanding that pipe at a voracious pace.
These master limited partnerships are notorious issuers of stock. EPD is only about a point-and-a-half off of its high and it did trade down to $49 from $55 not that long ago on the usual scare that Congress would change the tax status of the company.
But I think it's still a decent entry point to get some of this 4.79% yielder. I would put on half and then hope it goes to a 5% yield through price depreciation.
Keep in mind this is the Big Daddy of all of the mlps at $50 billion. It will sell down if another big mlp offers stock. Still, it is the highest quality and has the biggest opportunity of all of them right now, ven bigger than Kinder Morgan (KMP) and certainly more than Energy Transfer Partners (ETP), even as ETP yields 7.7%, Trust me, I learned the hard way that the yield cannot make up for the price depreciation when the company isn't boosting the distribution or is as poorly run as ETP.
Stick with quality. It's obvious that the insiders sure are. Who am I to say they are wrong? I just hope you get a chance to buy it underneath their price.