Energy Pipes & Pennies: A Look at EPD vs. ET

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Now, gather ’round, if you will, and let’s talk about pipelines. Not the kind that carry water to your farm, but the sort that carry oil and gas – the black blood of modern industry, as some folks call it. We’ve got two grand specimens before us today: Enterprise Products Partners (EPD 0.27%) and Energy Transfer (ET 1.68%). Both are sizable operators in the business of moving these commodities about, and both offer a dividend – a slice of the profits, if you please – that’s enough to catch the eye of any income-seeking investor.

The energy business, you see, is a fickle mistress. She’s prone to fits and starts, booms and busts. But these two, they’ve built themselves businesses that, while not entirely immune to the storms, are at least built on solid ground. The question, then, isn’t whether they’ll pay a dividend, but which one will offer a steadier, more reliable stream of income for a fella lookin’ to build a bit of security.

A Yield Here, A Yield There

Enterprise, bless its conservative soul, is currently offerin’ investors a distribution yield of around 6.3%. Energy Transfer, now, that one’s a bit more… spirited. It’s clockin’ in at 7.1%. Now, a simple man might say, “More is better!” and reach for the higher yield without a second thought. And there’s a certain logic to that. Both these partnerships are likely to see their distributions grow at a modest pace, perhaps in the low to mid-single digits. Slow and steady, they say, wins the race. But sometimes, a fella needs to look beneath the surface.

Energy Transfer, you see, has a history. A bit of a checkered one, if I’m bein’ honest. Back in 2020, when the world went topsy-turvy with the coronavirus, they had to halve their distribution. A drastic measure, indeed. And before that, in 2016, during another downturn, they nearly scuttled a planned acquisition. A messy affair, it was, and one that could have easily led to another dividend cut. A man needs to remember, a high yield is often a sign of risk, a bit like a brightly colored snake – pretty to look at, but best admired from a distance.

If you’re a man who relies on that income to pay the bills, to keep a roof over your head, Energy Transfer might give you a few sleepless nights. A bit of uncertainty is one thing, but a constant worry about where your next payment is comin’ from is another entirely.

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Enterprise: Solid as an Old Oak

Now, Enterprise, that’s a different breed of cat altogether. They’ve been playin’ it safe for a long time, and they’ve got the record to prove it. Twenty-seven years of annual distribution increases! That’s longer than some folks have been alive! Add to that an investment-grade balance sheet – a fancy way of sayin’ they’re financially sound – and a distribution coverage ratio of 1.7x – meaning they earn more than enough to cover their payouts – and you’ve got a business that’s built to last.

For most dividend investors, Enterprise is likely the better option. The extra income from Energy Transfer is temptin’, to be sure, but it comes with a dose of uncertainty that many won’t find worth the trouble. If you’re spendin’ all your time worryin’ about whether Energy Transfer’s distribution will be cut every time the energy sector sneezes, how much peace of mind are you really gettin’ for that extra penny?

It’s a simple truth, friend. Sometimes, the most reliable path isn’t the one that promises the biggest reward, but the one that offers the most security. And in the world of pipelines and pennies, that’s a lesson worth rememberin’.

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2026-02-03 06:12