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Motley Fool Issues Rare “All In” Buy Alert

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Enterprise Products Partners  (EPD -2.90% ) has been one of the better passive income producers over the past couple of decades. The master limited partnership (MLP) has increased its cash distribution to investors for 23 straight years, growing it at a 7% compound annual rate. That payout currently yields over 7.3%, well above the average for dividend-paying stocks.

The energy midstream company should have the fuel to grow that payout for years to come. It already has a sizable backlog of commercially secured capital projects under construction. Meanwhile, it has a growing pipeline of projects under development, including the potential to build a large petrochemical plant in Texas. That recently revealed project could extend its distribution-growth outlook further into the future.

Enterprise Products Partners currently has $4.5 billion of major projects under construction. These projects run the gamut and include  natural gas pipelines, additional natural gas liquids (NGLs) processing and export terminal capacity, and petrochemical facilities and related infrastructure. It expects to finish these projects over the next few years, with the latest forecast in-service date in 2025.

The MLP anticipates investing about $1.5 billion per year in these expansion projects. That investment should help steadily grow its cash flow, enabling Enterprise to continue increasing its distribution.

Enterprise Products Partners also has several other potential projects under development. It's working on a large oil export terminal along the U.S. Gulf Coast. The company has partnered with Canadian energy infrastructure giant  Enbridge  to build the proposed Sea Port Oil Terminal (SPOT) and secured oil giant  Chevron  as an anchor shipper. Enterprise is also working with  Occidental Petroleum  on a potential carbon dioxide transportation and sequestration project along the Gulf Coast. 

Meanwhile, the company recently filed plans to build a $5 billion petrochemical plant in Texas. The facility would turn NGLs (ethane and propane) into building blocks for  chemicals  and other products.

Enterprise already has a sizable petrochemicals business. It has one plant that turns propane into propylene, used mainly to make polypropylene plastics for injection molding and fibers, and another under construction. In addition, it's working to double its ethylene terminal's export capacity by 2025.

Due to continued strong petrochemical demand, the company's customers are seeking more petchem production capacity. Instead of building a world-scale facility themselves, they're turning to Enterprise to develop and operate the facility on their behalf. They'd purchase the petchem products from Enterprise under fee-based contracts, enabling the MLP to generate predictable cash flow from the facility.

However, it's worth noting that Enterprise isn't the only MLP pursuing a new petchem project in the region. Rival MLP  Energy Transfer  (ET -2.96% ) is also working on a  new petrochemical project along the U.S. Gulf Coast . That project would enable Energy Transfer to further expand into the chemicals value chain by connecting a production facility to its other infrastructure, including its recently purchased underground storage terminals and growing export capacity. 

With demand for ethylene and propylene expected to continue growing for the next several years, both companies could move forward with separate projects. That would give each more fuel to increase their already sizable cash distributions in the future.

Enterprise Products Partners has treated investors to steadily rising cash distributions for over two decades. That growth streak is showing no signs of stopping, given what it has coming down the pipeline. The company's steadily rising payout makes it an excellent option for those seeking a growing source of passive income.

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