I discovered Enterprise Products Partners (EPD) in the fall of 2008. I was 29. For the first time my wife and I had some “mad money” to invest outside of our IRA’s. I wanted something stable, with growth and wouldn't fluctuate 10% in a day, the average search criteria for someone in their 20's. Okay, maybe not, but it was the fall of 2008 after all.
A friend told me about EPD, what they did, their history and I was immediately intrigued. This same person was kind enough to provide MLP primers as well as other background information detailing both the benefits and risks of the space. I was hooked .
At that time EPD had raised its distribution (an MLP term for dividend) quarter after quarter for YEARS and was yielding around 10%. That streak continues today and now stands around 40 quarters…or 10 years. I made my first modest purchase in October of 2008 at $22.37 and started to devour anything I could on MLP's, the tax benefits and most importantly, the emerging energy boom in North America.
As the financial crisis hit full steam, EPD was not immune and the unit price was hit, reaching 20 and change in December. I bought more and tripled down in March of 2009, with the units pricing at 18.96 and the yield reaching 13%. EPD had reported two quarters since I first started following it and kept the streak intact of RAISING their distribution. I thought to myself, “Self, if EPD can keep raising the distribution thru all this, what happens if the economy improves?”
My purchases continued. MLP’s were far from the mainstream in 2009 and 2010. I managed to get friends and family on the bandwagon but some gave up, not wanting to deal with the K-1. (I had my grandfather in at 26, he sold at 42, irrupted that his tax return was delayed one year by five weeks.) I putzed around with other stocks but EPD just sat in my account, with compounding distributions as well as buying on any dip caused by an overall market correction or rumors of MLP’s being investigated by congress. Not a single purchase was under water for more than a few weeks after the very first, you know, when the world was ending. My last purchase came in November 2012 , just north of 50 as Congress was supposedly debating MLP reform.
While I’ve continued to reinvest the distributions, I’ve been reluctant to pull the trigger on any more for several reasons. One, it’s my largest position, I don’t need it to be any bigger and two, you can see where I started buying it. It’s hard to get excited to buy something at 77 when you were buying it around 20 for a year. (My cost basis, with distributions reinvested is $33.32)
There are also risks, the yield is now closer to 3 then 13, if rates rise rapidly , EPD could get hit by owners given treasuries another look and because the cost to borrow (important for MLP's) will go up. Perhaps congress will look at MLP reform?Though my theory has always been that they all own MLP’s in their personal accounts so they won’t bother.
A lesson i learned in highschool social studies always rings in my head "Those who set the rules, set the rules for themselves."
Six years after my initial purchase, EPD is set to split 2-1 and Kinder Morgan has just announced a massive deal that will bring all of its entities under one roof. Something EPD has managed to do over the past 4 years while still keeping the MLP structure. A good time for contemplation.
I feel very fortunate and I tell you my history with this company not to impress you or anyone else. There was no secret sauce to finding EPD. It’s a local company and information was and is plentiful where I live. I tell you all this because there is probably an EPD by you. Maybe it’s a restaurant, maybe a regional bank, a retailer, who knows, but odds are there’s something close to you that YOU can have an edge for a number of years before the rest of us catch on. IT IS POSSIBLE if you wan’t to put in the work and the time.
It didn’t take a genius to dump some money into an entity yielding 13% and with massive exposure to a North American energy boom six years ago. It took common sense and information. Know what you own. Recently, EPD ticked close to 80, it soon fell to around 74. Long terms shareholders were ecstatic. “I can reinvest my distribution at cheaper prices!” We also knew the run to 80 was too fast to maintain.
You see when you follow a company over a period of years, you know how it reacts to different situations. EPD always runs up into the ex-distribution date and always sells off after. Buying opportunities used to present themselves in April. “This K-1 is a pain in the ass, get me out of this POS!!!”, or whenever Congress was contemplating tax reform.
Follow a stock/company you like for a while and you’ll learn the same information. You’ll know what will move the stock that’s out of the company’s control and you’ll know if the story as materially changed. You can find your own EPD…and have a love story of your very own.