I love to drive my truck and my motorcycle. I even like being a passenger while someone else drives. If the plan includes a road trip big or small, I’m in. Since I’m not ready to change my driving habits, I ran the numbers to see how much my oil company dividends would offset some of my gas expenses. I’ll use my favorite MLP for over a decade, Enterprise Products Partners LP (EPD), for this example, writes Kelly Green, editor of Dividend Digest.
Gas prices are high. Whether you drive more or less than I do, gasoline costs are taking a bigger bite out of your budget. Prior to 2021, the annual national average price for a gallon of gas exceeded $3 just five times. It didn’t hit $2 until 2005! Now, regular gas is around $3.64 here in South Florida.
Meanwhile, it’s no secret that my favorite way to hold oil exposure is with pipeline companies structured as MLPs (Master Limited Partnerships). No matter what’s happening with the price of crude oil, it has to be transported through pipelines. And these pipeline companies are being paid through fixed-price contracts to make sure that oil continues to move.
Enterprise Product Partners LP (EPD)
Plus, when a company is structured as an MLP, it is required to pass through almost all of its income to shareholders. The result is above-average yields for income investors.
EPD reported net income of $1.5 billion for the first quarter of 2024, up 5% year-over-year. Plus, the recent dividend yield was 7.2%.
Let’s say you have a typical-size vehicle with a 15-gallon gas tank. At today’s national average of $3.64, you’re looking at a bill of $54.60 to fill the tank.
Now, let’s put that in terms of EPD dividends. EPD pays a $2.06 dividend per share annually. That pencils out to just 27 shares of EPD buying you a tank of gas every year. That’s an investment of $775 at EPD’s recent share price. Sure, one tank of gas per year doesn’t sound like much. But if your long-term goal is to have your dividends pay your bills, you have to start somewhere.
If you don’t have $775 to get started, start smaller. Buy one share every other week. In just one year, you’ll have enough shares to get your “bonus” tank of gas the following year. If you stick with this program, you’ll continue to add free tanks of gas year after year.
A $5,000 investment in EPD would get you 6.5 tanks of gas, or one every other month. A $10,000 investment in EPD would equate to 13 fill-ups per year, or more than one every month.
Even better, EPD has raised its distributions every year for the past 25 years. Each year, you’ll be able to put just a little more gas in your tank or keep up with prices if we continue to see them rise.
Recommended Action: Buy EPD.
