How to Earn $1,000 a Month From Enterprise Products Partners Stock
Key Points
The yield on the company's stock is around 5.58%.
As a midstream operator, it isn't as affected as oil and gas companies by commodity prices.
As a Master Limited Partnership, the company's distributions offer tax advantages, but with complications.
Enterprise Products Partners (NYSE: EPD) is a stable midstream energy company with a high-yielding dividend. Investors looking for income are attracted to the stock because it has consistent cash flows that support its dividend, which, at its current share price, yields around 5.58%.
Enterprise avoids direct commodity price volatility by operating as a toll road for energy rather than betting on oil and gas prices. Instead of relying on commodity markets, the company earns steady revenue by owning the vital infrastructure needed to transport, process, and store energy products, including over 50,000 miles of pipelines, 300 million barrels of liquid storage, and major marine export terminals.
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If you were looking to earn $12,000 a year, or the equivalent of $1,000 a month, you would need to buy 5,357 shares of the stock. At its current price of $39.14 per share, you would need to shell out $209,672.98 to buy that many shares.
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It's important to note that Enterprise Products pays its dividend quarterly, like most dividend-paying stocks. So, you wouldn't get $1,000 a month, but $3,000 in dividends per quarter, totaling $12,000 a year, so a little budgeting would be required to give yourself payments of $1,000 a month.
Actually, there's a really good chance that you'll earn more than the equivalent of $1,000 in monthly dividends, because of the company's 28-year history of dividend growth. Over the past decade, it has increased its dividend by more than 35%.
As a Master Limited Partnership (MLP), Enterprise Products Partners issues a Schedule K-1 instead of a traditional 1099-DIV, which offers significant tax-deferred income benefits. Because MLPs generate massive noncash deductions, such as depreciation on pipelines and infrastructure, they heavily shield their earnings. For instance, if you receive $1,000 in distributions, your taxable net business income on the K-1 might only be $100 to $200, significantly lowering your immediate tax hit. Additionally, this pass-through income qualifies for the 20% Qualified Business Income (QBI) deduction, further reducing your tax obligation and allowing your capital to compound efficiently.
However, holding K-1 investments comes with specific trade-offs and structural nuances. The tax forms are notoriously complex and often arrive later in the spring. Furthermore, Enterprise Products is generally best held in a standard taxable brokerage account rather than in a Roth IRA or a traditional IRA, as tax-advantaged accounts can trigger unexpected tax complications, such as unrelated business taxable income.
James Halley has no position in any of the stocks mentioned. The Motley Fool recommends Enterprise Products Partners. The Motley Fool has a disclosure policy.