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Growth & Income

Todd Bunton

Enterprise Products Partners LP

EPD

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Investors looking for a safe haven amid a tumultuous market, but with strong growth prospects and a juicy yield should check out Enterprise Products Partners LP (EPD - Analyst Report).

Shares of Enterprise have held up extremely well despite the recent market pullback, supported in part by a juicy (and stable) 5.7% yield.

Additionally, analysts have been raising their estimates for Enterprise over the last several months as it has delivered 7 consecutive positive earnings surprises. It is a Zacks #1 Rank (Strong Buy) stock.

Based on current consensus estimates, analysts project 44% earnings growth this year and 11% next year.

Master Limited Partnership

Enterprise Products Partners is a Master Limited Partnership (MLP) operating in the natural gas and crude oil pipeline industry. With over 50,000 miles of pipelines and a market cap of $35.8 billion, it is the largest publicly traded energy partnership. It is headquartered in Houston, Texas.

Record Second Quarter Results

Enterprise Products Partners reported record financial results for its second quarter of 2011 on August 9. Revenues surged 49% year-over-year to $11.217 billion, well ahead of the Zacks Consensus Estimate of $9.455 billion. Fee-based natural gas processing volumes climbed 24%.

Operating income rose 19% while distributable cash flow jumped 46%. Earnings per unit came in at a record 51 cents, beating the Zacks Consensus Estimate of 47 cents. This was a 96% increase over the same quarter in 2010.

Outlook

Analysts revised their estimates higher for both 2011 and 2012 following strong Q2 results, sending the stock to a Zacks #1 Rank (Strong Buy).

Analysts are projecting strong earnings growth from Enterprise over the next two years. Based on consensus estimates, analysts project 44% earnings per unit growth this year and 11% growth next year.

Much of Enterprise's earnings are fee-based and not tied directly to oil and gas prices. This provides more stable income and cash flows, which it has used to reward unitholders through generous distribution hikes.

5.7% Distribution Yield

The partnership pays a distribution that currently yields a stellar 5.7%. And this distribution has been growing steadily over the last decade. Enterprise has raised its payout in each of the last 28 quarters, including throughout the Great Recession:

EPD: Enterprise Products Partners LP

Reasonable Valuation

Enterprise has held up exceptionally well during the recent market selloff. Shares are trading just 4% below their 52-week high.

Valuation still looks reasonable with shares trading at 19.3x 12-month forward earnings, essentially in-line with the industry average and a discount to its 10-year median of 21.0x.

The Bottom Line

Not all stocks have gotten slammed since late July. With a stable 5.7% distribution yield, strong growth prospects and reasonable valuation, Enterprise should continue to hold up quite well.

Todd Bunton is the Growth & Income Stock Strategist for Zacks Investment Research and Co-Editor of the Reitmeister Value Investor.

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