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Chasing Warren Buffett’s Pipeline Dreams: Unveiling the High-Yield Stock Alternative

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When it comes to Warren Buffett, cash is king. His conglomerate, Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B), oversees a vast empire that includes Northern Natural. This midstream marvel, focused on natural gas, boasts an impressive arsenal of assets that traverse the energy landscape. If you aspire to emulate Buffettโ€™s investment prowess, consider diving into the realm of natural gas by snagging a chunk of high-yield Enterprise Products Partners (NYSE: EPD). Hereโ€™s your primer on this lucrative opportunity.

The Allure of Steady Cash Flow

Buffettโ€™s penchant for the midstream sector is no secret. The unglamorous nature of the midstream business, with its toll-based revenue model, aligns perfectly with his thirst for dependable cash flows. Northern Natural, with its vast network spanning 14,200 miles of natural gas pipelines, reigns supreme as the largest interstate natural gas pipeline system in the U.S. Berkshire Hathawayโ€™s treasure trove consists of $33.7 billion in cash reserves, signaling a strategic approach to potential acquisitions in the future.

A person turning valves on an energy pipeline.

Image source: Getty Images.

In the world of midstream energy, predictability reigns supreme. These companies, like Northern Natural, operate toll-taker models, which ensure a steady flow of income from crucial energy infrastructure. Enter Enterprise Products Partners, a prime example of this income-generating machinery.

Enterprise Products Partners: An Industry Titan

Boasting a market capitalization exceeding $60 billion, Enterprise Products Partners stands tall as one of North Americaโ€™s premier energy infrastructure behemoths. With a balance sheet that gleams with an investment-grade sheen, this veteran player has upped its distribution for an impressive 25 years in a row. The cherry on top for investors seeking income? A robust 6.9% yield.

Unlike its peer Northern Natural, Enterpriseโ€™s reach extends beyond just natural gas. From pipelines to storage, processing to transportation, and even international energy export facilities, the company epitomizes diversified strength. Surpassing Northern Naturalโ€™s scope, Enterprise managed 34% of U.S. waterborne natural gas liquid exports, 20% of crude exports, and 13% of petrochemical and refined product exports in 2023.

A Source of Consistent Returns

While Enterpriseโ€™s distributions drive much of its appeal, the companyโ€™s financial fortitude underpins its reputation. With $6.8 billion earmarked for capital investments through 2026, alongside steady distribution growth, this industry stalwart offers a stable income stream over the long haul. Despite some tax complexities associated with its MLP structure, Enterpriseโ€™s income potential shines bright.

Seeking a Buffett-esque investment journey? While Berkshire Hathaway remains a gateway to Northern Natural, the absence of dividends poses a hurdle. Opting for Enterprise Products Partners opens a direct gateway to substantial distributions, making it a darling for dividend-seeking investors.

Investing entails its share of risks and rewards. Conduct thorough research and seek advice if necessary.

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