Enterprise Products Partners (NYSE:EPD) and Kinder Morgan (NYSE:NYSE:KMI), both prominent entities in the midstream energy sector, are currently being undervalued by Wall Street, despite their business models guaranteeing stability and strong returns. The firms, which own global oil and gas pipelines, generate stable cash flows from usage fees, offering resilience even during periods of low energy prices. This robustness positions them as appealing options for investors seeking a higher-yielding, stable source of passive income in the midstream sector that is currently overlooked.
EPD, boasting a 25-year history of distribution increases and a 7.2% yield, anticipates modest mid-single-digit growth. This projected growth trajectory makes its story particularly attractive. On the other hand, while KMI yields 6.6%, its past includes a drastic dividend cut in 2016 and unfulfilled promises of dividend increases, exacerbated by the impact of the coronavirus pandemic. KMI's higher leverage restricts financial flexibility during challenging times, leading to trust issues among conservative investors.
Despite the similar cash flow coverage between EPD and KMI, EPD is viewed as a "safer income bet." A higher yield does not necessarily indicate increased risk in this case.
InvestingPro Insights
Looking at the real-time data from InvestingPro, EPD has a market cap of 58.81B USD and a P/E ratio of 10.94 as of Q2 2023. The company has experienced a revenue growth of 1.84% during the last twelve months as of Q2 2023. On the other hand, KMI has a market cap of 36.39B USD and a P/E ratio of 14.97 as of Q3 2023. The company's revenue has been declining at an accelerating rate of -16.65% during the same period.
Two key InvestingPro Tips for EPD are that the company has consistently increased earnings per share and has raised its dividend for 26 consecutive years, which aligns with its reputation of stability and strong returns. For KMI, it's worth noting that the company has high earnings quality, with free cash flow exceeding net income, and it has raised its dividend for 6 consecutive years.
There are more insights and tips available on InvestingPro, which offers real-time data and expert advice for investors. For instance, there are 10 additional tips for EPD and 7 additional tips for KMI that can be found on their respective pages. If you're interested in gaining access to these tips and more, consider subscribing to an InvestingPro plan.
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