Units of Corporate product partners (NYSE: EPD) have been excruciatingly volatile this year. the MLP fall almost 40% in March due to the craterisation of crude prices. It recovered part of this income after a 27.3% increase in April, according to data provided by S&P Global Market Intelligence. Aside from some stabilization of the oil market, the MLP declared solid first quarter results, which helped lighten part of the weight of the company’s valuation.
Both Enterprise Products Partners’ profits and cash flows fell from low single-digit rates in the first quarter as they felt some impact from all of the volatility in the oil market. The company also warned that the oil glut caused by the COVID-19 epidemic would likely weigh on volumes in the second quarter. For this reason, he planned to reduce capital expenditures by $ 1 billion as well as an additional $ 100 million for maintenance-related projects.
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These spending cuts will reduce the amount of money companies have to borrow to finance their expansion. For this reason, investors are more confident that he can maintain his payment during the recession.
With Enterprise Products Partners units still declining sharply for the year, its distribution is just around 10%. While such a high payment is often a red flag, that doesn’t seem to be the case with Enterprise Products Partners. The company has a strong balance sheet and high quality cash flow, which confirms its belief that it can defend and maintain its distribution during this slowdown. For this reason, it is a very attractive option for yield seekers to buy even after the rebound last month.
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Matthew DiLallo owns shares of Enterprise Products Partners. The Motley Fool recommends Enterprise Products Partners. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.