Enterprise Products Partners (EPD)

As market volatility continues to challenge investors in 2025, identifying businesses with genuine recession resistance has become increasingly valuable. Enterprise Products Partners (NYSE: EPD) stands out as a compelling opportunity that combines defensive characteristics with an attractive income profile, potentially offering both protection and returns in an uncertain environment.

A Business Model Built for Stability

Enterprise Products Partners ranks among the nation’s largest energy midstream companies, operating critical infrastructure that transports, processes, stores, and exports various energy commodities. What makes EPD particularly attractive in the current environment is its demand-based business model structured around long-term, fixed-rate contracts and government-regulated rate structures.

This business structure creates remarkably durable cash flows that have proven resilient through multiple economic cycles. Unlike many energy companies directly exposed to commodity price fluctuations, Enterprise gets paid the same fee regardless of the price of commodities flowing through its midstream network.

Multiple Layers of Protection Against Current Risks

Several characteristics position Enterprise Products Partners to weather potential economic headwinds:

1. Recession Resistance: Energy demand tends to remain relatively stable even during economic downturns, providing a solid foundation for EPD’s cash flows.
2. Inflation Hedges: Approximately 90% of EPD’s long-term contracts include escalation provisions that mitigate the effects of inflation, addressing a key concern in the current economic environment.
3. Financial Fortress: As the only midstream energy company with A-rated credit, Enterprise enjoys lower borrowing costs and better terms than competitors. The company maintains a conservative leverage ratio of 3.1 (well below the 3.5-4.5 range typical in the sector) and a debt portfolio that’s 98.2% fixed at an average rate of 4.7%.
4. Visible Growth Pipeline: The partnership has $7.6 billion in major capital projects under construction through the end of next year, with $6 billion expected to enter commercial service this year – creating clear pathways for continued cash flow growth.

Income You Can Count On

Perhaps most compelling for income-focused investors is Enterprise’s exceptional distribution history. The partnership recently achieved its 26th consecutive year of distribution increases – a period spanning multiple severe recessions, demonstrating the exceptional durability of its business model and cash flow.

Currently yielding around 7%, EPD’s distribution provides a substantial income advantage compared to the S&P 500’s sub-1.5% yield. This high-yielding payout delivers a tangible base return throughout economic cycles, while being well-covered with a conservative 1.7x distribution coverage ratio.

Technical Perspective

Trading in the low $30s, Enterprise Products Partners has shown relative stability compared to broader market indexes in recent weeks. The stock remains within its 52-week range, showing neither the excessive optimism that might suggest overvaluation nor the severe pressure seen in more economically sensitive sectors.

Investment Thesis: Stability Without Sacrificing Returns

The core investment thesis for Enterprise Products Partners centers on its ability to provide both meaningful income and potential price stability during market volatility. For investors concerned about recession risks, inflation persistence, or simply seeking to reduce portfolio volatility, EPD offers an attractive combination of current income, growth potential, and proven resilience.

With the broader market experiencing significant swings and both the S&P 500 and Nasdaq showing double-digit declines from their peaks, Enterprise Products Partners represents a compelling opportunity to add stability while maintaining exposure to essential infrastructure that supports the American economy regardless of economic conditions.