10 Extreme Dividend Stocks With Upside Potential

5. Enterprise Products Partners L.P. (NYSE:EPD)

Upside Potential as of August 14: 18.16%

Dividend Yield as of August 14: 7.36%

Enterprise Products Partners L.P. (NYSE:EPD) is a midstream natural gas and crude oil pipeline company that provides related products and petrochemicals. The company benefits a lot from its business model as midstream companies own essential infrastructure like pipelines, storage facilities, and transportation systems. These assets are crucial for linking the upstream sector (drilling) with the downstream sector (refining and chemicals) and for connecting to global markets. These companies typically earn revenue by charging fees for the use of their infrastructure, making them toll-taker businesses. Consequently, their financial performance is more influenced by energy demand than by energy prices. Since energy demand remains strong even when prices are low, this provides stability.

Enterprise Products Partners L.P. (NYSE:EPD) is also a great investment from a dividend point of view. Firstly, it has strong cash generation capabilities. In the second quarter of 2024, the distributable cash flow (DCF) came in at $1.8 billion, up from $1.7 billion in the same period last year. Its operating cash flow also grew to $2.1 billion during the quarter, from $1.9 billion in the prior-year period. For the twelve months ending June 30, 2024, the company’s payout ratio, which includes distributions to common unit-holders and buybacks of partnership common units, was 55 percent of adjusted cash flow from operations.

In addition to this, Enterprise Products Partners L.P. (NYSE:EPD) has raised its dividends for 26 consecutive years. On July 11, the company announced a 1.9% hike in its quarterly dividend to $0.525 per share. In the second quarter of 2024, the company’s DCF covered these dividend payments by 1.6 times, and it retained $661 million in DCF. As of August 14, the stock offers an impressive dividend yield of 7.36%. Analysts hold a consensus Strong Buy rating on EPD with a $33.7 price target, showing an 18% upside potential.