We recently compiled a list of the 12 Best Long-Term Dividend Stocks to Invest in Right Now. In this article, we are going to take a look at where Enterprise Products Partners L.P. (NYSE:EPD) stands against the other best dividend stocks for the long term.
The allure of steady income remains a top priority, come rain or shine in the market and for that, investors often prioritize stable companies. High-quality stocks provide investors with the opportunity to earn through dividends while also benefiting from potential price growth fueled by increasing earnings. According to a report by Hartford Funds, dividends have been a major contributor to the returns investors have enjoyed over the past several decades. Since 1960, reinvested dividends and the impact of compounding have accounted for 85% of the cumulative total returns of the broader market.
Before exploring the long-term benefits of dividend stocks, let’s take a look at how dividend investing has performed in recent years. The year 2024 has been particularly notable for dividends, with several major tech companies introducing quarterly payouts to shareholders in the first quarter. In addition, the sustained inflows into dividend-focused ETFs, even during challenging years like 2024, are a positive sign. This suggests that dividend investing may rely less on chasing performance compared to other strategies. Furthermore, US companies are on pace to set a new record for total dividend payments by year-end. This trend has left analysts optimistic about the future potential of dividend investing.
Over the long term, companies that pay dividends have demonstrated a remarkable history of delivering strong total returns. Data from the French Data Library, highlighted in a June report by Morningstar, showed that dividend-paying stocks outperform those that don’t, with high-yield stocks being the top-performing income segment in the US equity market since 1927. The reasons for this include the elimination of speculative companies, the financial discipline imposed on corporate managers by regular dividend payments, and the advantage of the “value effect,” where stocks with lower valuations tend to outperform over time.
READ ALSO: 8 Best American Dividend Stocks To Buy Right Now
Steven Wieting, who serves as the chief investment strategist at Citi Wealth, expressed the view that high-quality dividend-paying stocks across different sectors have the potential to deliver better performance than the broader market in the coming years. During a conversation with Barron’s, he highlighted that an increasing dividend provides a clear advantage to shareholders while also reflecting the financial strength of companies with robust balance sheets. He remarked that dividends are a reliable indicator since they cannot be fabricated.
That said, maintaining consistent dividend growth over time requires both financial stability and a strong commitment. Stocks that focus on dividend growth have historically outperformed the market, thanks to their potential for capital appreciation and robust financial health. The Dividend Aristocrats Index, which includes companies that have increased their dividends for at least 25 consecutive years, has provided shareholders with a remarkable return of 10.68% from its inception in 2005 through 2023, according to ProShares. In contrast, the broader market returned only 10.05% during the same period. Notably, the dividend aristocrats achieved these impressive returns with lower volatility, recording a volatility rate of 15.30%, compared to the benchmark’s 16.24%. This demonstrates that investing in dividend growth stocks can offer both stability and attractive returns over time.
Aerial view of a refinery tower surrounded by the sprawling landscape of pipelines in an oil & gas midstream facility.
Our Methodology
To compile this list, we thoroughly reviewed reputable sources such as Forbes, Morningstar, Barron’s, CNBC, Times, and Business Insider. We aimed to identify the top long-term dividend stocks recommended by financial media, analysts, and experts. From our research, we picked 12 dividend stocks which are the most popular in the financial media these days. These stocks have strong dividend histories and are financially sound, indicating their ability to sustain dividend payments well into the future. The list is ranked in ascending order of the number of hedge fund investors, according to Insider Monkey’s database of 900 hedge funds as of Q3 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
Enterprise Products Partners L.P. (NYSE:EPD)
Number of Hedge Fund Holders: 25
Enterprise Products Partners L.P. (NYSE:EPD) is an American midstream natural gas and crude oil pipeline company that offers petrochemicals and related products. The company’s reliability is rooted in its predominantly fee-based business model, which minimizes exposure to commodity or spread risk. Around 90% of its contracts include inflation-adjustment clauses. In addition, the company has traditionally maintained a cautious approach to leverage, ensured strong distribution coverage, and managed its growth capital expenditures prudently. Since the start of 2024, the stock has surged by nearly 22%.
In the third quarter of 2024, Enterprise Products Partners L.P. (NYSE:EPD) reported revenue of $13.78 billion, which showed a nearly 15% growth from the same period last year. The revenue, however, missed analysts’ estimates by over $97 million. The company’s operating income was $1.78 billion and its net income came in at $1.43 billion, which grew from $1.7 billion and $1.3 billion YoY, respectively.
Enterprise Products Partners L.P. (NYSE:EPD)’s cash position also remained strong. In the most recent quarter, the company generated $2.1 billion in operating cash flow, up 4% from the same period last year. The company’s distributable cash flow came in at $2 billion, showing a 5% increase on a YoY basis. For the twelve months ending September 30, 2024, it allocated 56% of its Adjusted Cash Flow from Operations (CFFO) to distributions for common unitholders and the repurchase of partnership common units.
Enterprise Products Partners L.P. (NYSE:EPD) is one of the best dividend stocks with 26 consecutive years of dividend growth under its belt. The company offers a quarterly dividend of $0.525 per share and has a dividend yield of 6.46%, as of December 11.
At the end of Q3 2024, 25 hedge funds tracked by Insider Monkey held stakes in Enterprise Products Partners L.P. (NYSE:EPD), up from 23 in the previous quarter. The consolidated value of these stakes is nearly $316 million. With over 5.4 million shares, Fairholme (FAIRX) was the company’s leading stakeholder in Q3.
Overall, EPD ranks 12th on our list of the best long-term dividend stocks to invest in right now. While we acknowledge the potential for EPD to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than EPD but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
