This Top High-Yield Dividend Stock's Exports to China Could Take a Hit. Should Income Investors Be Worried?
June 3, 2025
Key Points
Enterprise Products Partners
(NYSE: EPD)
has been an elite income-producing investment
over the years
. The master limited partnership (MLP) has raised its cash distribution to investors for 26 straight years (every year since its initial public offering). The energy midstream giant currently offers a yield of around 7%,
which is
several times higher than the
S&P 500
(less than 1.5%).
One factor fueling the
MLP
's lucrative and steadily growing payout is its leading energy export business. It operates several marine terminals along the U.S. Gulf Coast that export natural gas liquids, crude oil, petrochemicals, and refined products to global markets.
China is a major destination for its ethane and butane exports. That's a potential problem now that the U.S. Department of Commerce
is requiring
companies to apply for a license to export to China. Here's a look at whether this policy shift could affect the company's ability to
continue growing
its high-yielding payout.
Stopping the flow of ethane to China
The Commerce Department recently ordered companies to stop shipping
goods, including
ethane and butane
,
to China without a license.
That will have a direct effect on Enterprise Products Partners.
The company's marine terminal on the Houston ship channel loaded about 85,000 barrels of ethane per day last year for export to Chinese markets. That represented about 40% of the volumes from that facility, a big chunk of this country's ethane exports to China, which hit
a record
227,000 barrels per day last year. The U.S. also exported
a record
26,000 barrels of butane per day in 2024.
The company is currently evaluating its procedures and internal controls. It said in a regulatory filing that it's not yet sure if it
will be able to
obtain a license to resume exports to China.
One potential roadblock to a license is that an agency of the Commerce Department told the company that ethane and butane exports to China pose an unacceptable risk of military end-use by the country.
However, that's not the typical use of ethane.
Chinese petrochemical companies use
the
cheaper natural-gas-based
product
in place
of oil-based naphtha as
a
feedstock
to
produce
plastics and chemicals.
It also has heating and cooking uses.
An uncertain near-term impact
Enterprise isn't sure how much this policy change will affect its operations and cash flow. A big unknown is whether the industry
will be able
to
quickly find alternative markets
and uses for the U.S. ethane and butane that were flowing to China. It's also not clear how much effect this will have on prices.
China is a
major
energy consumer, making it a prime destination for U.S. hydrocarbons. U.S. exports satisfy 27% of the country's demand. While the Trump administration is currently curtailing exports to China, increasing U.S. energy export volumes
to the country
could help reduce the current trade imbalance.
Enterprise's co-CEO Jim Teague said on the company's first-quarter conference call last month that the new administration's tariff plan "is causing nothing short of chaos
around the world
. Energy
is not excluded
." However, his company
believes
that the administration's policies have an end goal,
which is
"intended to promote U.S. energy, not just for the next four years, but for decades," Teague added. That's because U.S. energy is important to our economy, global markets, and
our balance of trade
.
Built to withstand the uncertainty
The new license requirements to export ethane to China could
have
some
effect on
Enterprise Products Partners' export business.
However, the company has one of the most diversified midstream operations in the industry, which should help mute the impact.
On top of that, it has one of the strongest financial profiles in the energy midstream sector. Because of that, the headwind shouldn't significantly affect the MLP's ability to continue paying a growing distribution in the near term.
Meanwhile, the administration's policies should be net positives for the U.S. energy sector over the long term, especially for exports, since they're crucial to helping balance trade. Given all the positives, the company remains a rock-solid option for income-seeking investors to buy and hold for the long haul.
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Matt DiLallo
has positions in Enterprise Products Partners. The Motley Fool recommends Enterprise Products Partners. The Motley Fool has a
disclosure policy
.
