Smart Dividend Portfolio Edition #53: Fueling Gains
1
Dear Investor,
Welcome to the 53 rdedition of TipRanks’ Smart Dividend Portfolio & Newsletter.
1
1
Market-Moving News: March 24, 2025
Friday opened on a down note but staged a strong turnaround late in the trading day, helping close the week in the green. The Dow Jones Industrial Average (DJIA) ended the week with a gain of 1.2%, while the S&P 500 (SPX) rose by 0.51%, snapping a four-week losing streak. Meanwhile, the tech benchmarks Nasdaq Composite (NDAQ) and Nasdaq-100 (NDX) added 0.17% and 0.25%, respectively.
Another choppy week has gone by, with volatility exacerbated on Friday by a “Triple Witching” event, in which roughly $4.7 trillion worth of options contracts expired – one of the largest expirations since December. Even before that, the week had been a rollercoaster, with Monday’s surge giving way to Tuesday’s drop, then staging a Fed-induced rally on Wednesday just to give up the gains on Thursday as trade-war fears returned.
As concerns over the tariff impacts on growth and inflation add to worries over still-elevated stock valuations, analysts forecast continued market volatility until at least the second half of the year, with no new records in the cards for the next several months. Several leading brokerages have cut their end-year targets for the S&P 500, though many still foresee a low double-digit annual increase.
Facing a long stretch of volatile, sideways trading amid rising economic risks, many mutual and hedge funds are rotating into international equities. However, year-to-date losses in all major indexes haven’t deterred the retail crowd. Individual investor inflows into U.S. stocks amounted to more than $12 billion in the week to March 19 – when the S&P 500 briefly fell into correction territory – significantly above the 12-month average. This buy-the-dip doubling down may be a contrarian signal of a nearing bear market or a sign that retail investors are not buying the recessionary forecasts.
In fact, investors have good reason to be more optimistic about the economy than headlines suggest. The Federal Reserve – which held rates steady, as expected – confirmed that the economy remains healthy despite increasing uncertainty. While soft data – such as consumer sentiment and PMI indexes – have been deteriorating, hard data, including GDP growth and job-market numbers, continues to come in solid.
Although the Fed has increased its expectations for inflation in 2025 while lowering its GDP growth projection, the takeaways from the central bank’s meeting were largely positive. Policymakers said they expect 50 basis points of cuts this year, unchanged from their previous projection in December. Moreover, the Fed Chair Jerome Powell stated that the Fed views any possible tariff impacts as “transitory,” with data still supporting their outlook for inflation to decline to the 2% target over a longer period.
On the one hand, the Fed’s dovish tone supported the flagging market sentiment, helping the S&P 500 and the Nasdaq avoid a fifth straight week of losses. Conversely, the return of the “transitory” rhetoric leaves an uneasy feeling of déjà vu from early 2021, when the post-COVID inflation surge caught policymakers unprepared. Then, the central bank’s sticking with the “transitory” narrative for too long forced it into aggressive rate hikes in 2022, creating greater risk of a hard landing.
1
1
1
This Week’s Quality Dividend Stock Idea
Enterprise Products Partners (EPD) is a leading U.S. midstream energy company engaged in the transportation, storage, processing, and export of natural gas, natural gas liquids (NGLs), crude oil, and petrochemicals. The company owns and operates over 50,000 miles of pipelines, storage facilities with over 300 million barrels of capacity, and 20 marine terminals, making it one of the largest midstream energy companies in the U.S. EPD plays a key role in connecting U.S. energy production with domestic and international markets.
1
Midstream Evolution
Founded in 1968 as a wholesale marketer of NGLs, EPD has grown into a top midstream energy company by building pipelines, storage terminals, and processing facilities. A major turning point came in 1998 when EPD went public, leveraging capital markets to accelerate expansion.
This momentum continued with the 2001 acquisition of Shell’s midstream assets, significantly enhancing its NGL infrastructure. The company further strengthened its position in natural gas transportation and processing through its 2004 merger with GulfTerra Energy Partners.
During the 2010s, Enterprise capitalized on the U.S. shale boom, expanding its crude oil and petrochemical infrastructure. Key projects included the Seaway Pipeline reversal (in partnership with Enbridge), enabling crude exports from the Gulf Coast, and the development of ethane export terminals to meet rising global demand. The company continues to expand its Gulf Coast export capabilities and integrated processing facilities, while maintaining a conservative balance sheet that ensures stable cash flows.
Today, EPD is a top U.S. midstream energy company with a market capitalization of $73.3 billion, annual revenues exceeding $56 billion and a Fortune 500 ranking of #90.
1
Expanding Reach
Enterprise Products Partners has strategically expanded its midstream energy footprint through key acquisitions over the past decade. In October 2014, EPD completed a $5.9 billion two-step acquisition of Oiltanking Partners, integrating its marine terminals and storage assets along the Texas Gulf Coast. This move strengthened EPD’s export capabilities, expanded access to waterborne markets, and enhanced its midstream service offerings.
The following year, the company acquired EFS Midstream for $2.15 billion, adding gas gathering and processing services in the Eagle Ford shale region. This acquisition extended the company’s integrated system deeper into the NGL and condensate rich areas of the Eagle Ford, enabling it to serve more producers and boost throughput across its network.
In early 2024, Enterprise Products Operating LLC, a subsidiary of EPD, signed a definitive agreement to acquire Piñon Midstream for $950 million, aiming to enhance the company’s natural gas processing and emissions control capabilities in the Delaware Basin.
1
Power Infrastructure
Enterprise Products Partners operates a vast midstream energy infrastructure network, generating stable, recurring cash flows through fee-based contracts. With approximately 90% of its agreements including escalation provisions, EPD minimizes exposure to commodity price volatility while mitigating inflation risks.
The company operates through four business segments—NGL Pipelines & Services, Crude Oil Pipelines & Services, Natural Gas Pipelines & Services, and Petrochemical & Refined Products Services. Liquid-focused operations account for roughly 87% of EPD’s gross operating margin, with NGLs alone contributing about 55%.
The company separates NGLs from natural gas streams, transports mixed NGLs to processing complexes, fractionates them into purity products like ethane and propane, stores them in underground caverns, and exports them to global markets. To meet growing demand, Enterprise has invested in infrastructure such as the 600 MBPD (600 thousand barrels per day) Bahia NGL Pipeline, connecting Permian Basin facilities to Mont Belvieu, and Fractionator 14 at Mont Belvieu, expanding fractionation capacity. Fractionation is a process that separates natural gas liquids into different hydrocarbon fractions based on their boiling points, resulting in usable products like fuel, plastics, and refrigerants.
Beyond NGLs, EPD’s crude oil pipelines and services contribute 16% of gross operating margin, generating revenue through transportation, storage, and export fees. Another 16% of gross operating margin comes from petrochemical and refined products services, including the transport and storage of petrochemicals, as well as isobutane and propane derivative production through dehydrogenation units. Natural gas pipelines and services account for 13% of gross operating margins, supported by long-term contracts for gathering, processing, and transportation.
EPD’s growth strategy is anchored in infrastructure expansion. The company has $7.6 billion in major projects under construction, with $6 billion set to come online in 2025. EPD is developing three new natural gas processing plants in the Permian Basin, adding 900 MMcf/d (million cubic feet per day) of capacity by 2026.
Enterprise has strategically invested in export infrastructure, such as ethane and LPG terminals, to capitalize on global energy market trends. The company intends to increase its LPG export capacity by 300 MBPD through a new Texas terminal by late 2026. Following its acquisition of Piñon, EPD is scaling its gas treating capacity in the Delaware Basin from 270 MMcf/d to 450 MMcf/d by the second half of 2025.
1
Fueling Growth
EPD has demonstrated strong financial performance over the past three years, with revenues and earnings increasing at a CAGR of 11.3% and 8.5%, respectively. This growth was driven by robust NGL demand, strategic Permian Basin expansions, and the strength of its integrated value chain.
In the fourth quarter, EPD reported net income of $0.74 per unit, surpassing analyst expectations of $0.71 and reflecting a 2.8% year-over-year increase. While revenue declined 2.9% to $14.2 billion due to lower commodity prices, it still slightly exceeded the $14.1 billion estimate.
For full-year 2024, revenue rose 13% to $56.23 billion, driven by stronger marketing revenues – particularly from NGLs, crude oil, and petrochemicals. Net income per unit grew 7% to $2.69. The company also expanded its exports, shipping over 70 million barrels of hydrocarbons in December and targeting over 100 million barrels per month by 2027. Additionally, EPD secured new ethane supply agreements in Asia, including a major contract in Vietnam.
Looking ahead, management expects cash flow growth in the mid-single digits as new projects come online later in the year. While overall industry fundamentals remain strong, some segments face pressure. Petrochemical markets are experiencing global oversupply, but EPD sees upside in ethylene exports, leveraging capacity reductions and underinvestment abroad.
EPD maintains a conservative financial posture, with a net debt-to-EBITDA ratio of 3.1x – which was reduced from 4.2x over the past seven years – against a target of 3x. Enterprise has an “A-” credit rating from S&P and Fitch and an “A3” rating from Moody’s.
With an average return on invested capital (ROIC) of 12% over the past decade, rising to 13% from 2021-2024, EPD continues to generate strong returns. This suggests that recent investments have been generating attractive returns, contributing to earnings growth.
1
Reliable Returns
Strong cash generation is the foundation of EPD’s dividend stability. Two key metrics – Distributable Cash Flow (DCF) and Cash Flow from Operations (CFFO) – capture the company’s ability to fund payouts and reinvest for growth. DCF reflects the cash left after operating expenses and maintenance capex and is the primary engine behind quarterly distributions. In 2024, EPD covered its payout 1.7 times, retaining $3.2 billion in excess cash to fund new projects.
CFFO, adjusted to strip out working capital swings, gives a cleaner view of recurring cash flow. EPD’s payout ratio based on this metric stood at 55% in 2024, with per-unit CFFO growing at a 4.3% CAGR since 2019. These numbers underscore the company’s ability to navigate market cycles—from the 2008 financial crisis to oil shocks to the COVID shutdown.
EPD has raised its dividend for 26 straight years, earning its status as a dividend aristocrat. Its latest quarterly payout of $0.535 per unit reflects a 3.9% year-over-year increase, bringing the annualized dividend to $2.14 per unit. Its 6.3% dividend yield far exceeds the sector average of 3.15%. Over the past decade, Enterprise has increased its dividend by an average of 3.7% annually, while keeping a sustainable payout ratio of 78.1%. Since its IPO, EPD has returned $56.8 billion to unitholders via distributions and buybacks. In 2024 alone, it returned $4.8 billion, including $1.1 billion in unit repurchases. By early 2025, it had used 57% of its $2.0 billion buyback authorization, including $63 million in Q4. These repurchases boost per-unit cash flow and support deleveraging. The stock has delivered a 17.5% return over the past year and now trades near its 52-week high. While it trades at a modest premium to the sector P/E average of 11.7x, it still ranks low among midstream peers—suggesting room for further expansion.
Analysts agree: Wall Street sees 9.5% upside from current levels, with firms like Barclays, Morgan Stanley, and Scotiabank recently raising their targets. Some now project over 17.5% upside following EPD’s strong Q4. Supporting this view, DCF valuation models suggest the stock remains undervalued by roughly 43%, reinforcing its appeal as a long-term value play.
1
Investing Takeaway
Enterprise Products Partners stands out as a stable and well-positioned midstream energy company with strong cash flows, a disciplined expansion strategy, and a commitment to shareholder returns. Its fee-based contracts provide insulation from commodity price volatility, while ongoing infrastructure investments ensure long-term growth. With a 26-year track record of dividend increases and a 6.3% yield, EPD remains an attractive option for income-focused investors. While global energy markets face headwinds, EPD’s strategic expansions, export capabilities, and efficiency improvements position it well for future growth.
1
1
Dividend Investor Portfolio
1
Portfolio News
▣ Allianz SE (ALIZY) has partnered with BlackRock, and T&D Holdings to acquire Viridium Group, a leading European life insurance consolidator, from Cinven for $3.3 billion. Generali Financial Holdings and Hannover Re will continue to remain investors in the company, with the structure of the consortium allowing additional long-term investors. Cinven has exited from its majority investment in Viridium after over a decade of developing Viridium. Following this acquisition, Viridium will remain an independent stand-alone platform, led by its current management, and continue to specialize in consolidating and managing life insurance portfolios as a long-term partner to the European insurance industry.
▣ JPMorgan (JPM) raised its quarterly dividend to $1.40 per share on the outstanding shares of its common stock, an increase of 12% from the prior quarterly dividend of $1.25 per share. The dividend is payable on April 30 to stockholders of record at the close of business on April 4.
▣ LyondellBasell (LYB) and Covestro announced that they will permanently close the Propylene Oxide Styrene and Monomer (POSM) production unit (PO11) at Maasvlakte, Netherlands. The company cited persistent profitability challenges from global overcapacity, rising Asian imports, and high European production costs. These pressures are expected to continue, making long-term profitability unfeasible.
▣ PepsiCo (PEP) announced the acquisition of a fast-growing prebiotic soda brand, Poppi for $1.95 billion, including $300M in expected tax benefits, with a net purchase price is $1.65 billion. The transaction also includes an additional earnout contingent on performance milestones within a specified period after the close of the acquisition.
▣ Qualcomm (QCOM) announced that it has raised its quarterly dividend from $0.85 to $0.89 per share of common stock. This dividend increase will be effective for quarterly dividends payable after March 27, 2025.
1.
Recent Trades
None at the moment, although we are considering adding a stock to our portfolio when the market conditions allow for an attractive entry point. Stay tuned.
1
1
Portfolio Attributes
| Dividend Portfolio Yield |
Expected Dividend Growth | Expected Annual Income |
| 3.97% | +8.06% | $5,924.69 |
| Yield-on-Cost Adjusted, Weighted |
Average Analyst 12-Month Growth Outlook | 10K Per Stock at the Time of Purchase |
Current Portfolio
| Name | EX-Dividend Date | Payment Date | Yield on Cost | Annual DPS |
| Automatic Data Processing (ADP) | Jun 12, 2025 | Jul 01, 2025 | 2.46% | $6.16 |
| Allianz SE ADR (ALIZY) | May 09, 2025 | May 28, 2025 | 5.79% | $1.60 |
| Amgen (AMGN) | May 16, 2025 | Jun 09, 2025 | 3.27% | $9.52 |
| BlackRock (BLK) | Jun 09, 2025 | Jun 26, 2025 | 2.56% | $20.84 |
| Bank of Nova Scotia (BNS) | Apr 01, 2025 | Apr 28, 2025 | 5.98% | $2.97 |
| EOG Resources (EOG) | Apr 17, 2025 | Apr 30, 2025 | 3.06% | $3.92 |
| IBM (IBM) | May 09, 2025 | Jun 10, 2025 | 3.13% | $6.68 |
| JPMorgan Chase (JPM) | Apr 04, 2025 | Apr 30, 2025 | 2.86% | $5.00 |
| Kroger (KR) | May 15, 2025 | Jun 02, 2025 | 2.82% | $1.28 |
| LyondellBasell (LYB) | Jun 03, 2025 | Jun 10, 2025 | 5.62% | $5.36 |
| PepsiCo (PEP) | Jun 09, 2025 | Jun 26, 2025 | 3.64% | $5.44 |
| Philip Morris (PM) | Jun 23, 2025 | Jul 17, 2025 | 6.06% | $5.40 |
| Qualcomm (QCOM) | May 29, 2025 | Jun 26, 2025 | 2.25% | $3.40 |
| VICI Properties (VICI) | Jun 18, 2025 | Jul 03, 2025 | 5.19% | $1.72 |
| ExxonMobil (XOM) | May 14, 2025 | Jun 10, 2025 | 3.64% | $3.96 |
1
1
1
Click here for more stock market analysis from TipRanks Macro & Markets research analyst Yulia Vaiman
1
Disclaimer
The information contained in this article represents the views and opinions of the writer only, and not the views or opinions of TipRanks or its affiliates and should be considered for informational purposes only. TipRanks makes no warranties about the completeness, accuracy, or reliability of such information. Nothing in this article should be taken as a recommendation or solicitation to purchase or sell securities. Nothing in the article constitutes legal, professional, investment, and/or financial advice and/or takes into account the specific needs and/or requirements of an individual, nor does any information in the article constitute a comprehensive or complete statement of the matters or subject discussed therein. TipRanks and its affiliates disclaim all liability or responsibility with respect to the content of the article, and any action taken upon the information in the article is at your own and sole risk. The link to this article does not constitute an endorsement or recommendation by TipRanks or its affiliates. Past performance is not indicative of future results, prices, or performance.
