Better Dividend Stock: Kinder Morgan vs. Enterprise Products Partners

But the reason for preferring Enterprise over Kinder Morgan is only partly to do with the yield, particularly if you are a dividend-focused investor

Here's what you need to know to decide between these two mid giants

What do Kinder Morgan and Enterprise do

From a big-picture perspective, both Kinder Morgan and Enterprise ducts Partners operate in the energy sector

This sector is known for being volatile, thanks to the huge impact that oil and natural gas prices have on the financial results of most energy companies

But not all energy companies, since Kinder Morgan and Enterprise are largely toll takers, charging fees for moving oil and natural gas around the world

Image source: Getty Images

Essentially, these mid players sit between the up (energy duction) and the down (chemicals and refining)

The pipelines, storage, and transportation assets they own generate reliable fees, with the price of the commodities moving through their systems far less important than demand for the services they vide

And demand for energy tends to be fairly high even when energy prices are low

So both Kinder Morgan and Enterprise have attractive and reliable models in what is an otherwise volatile industry

From this perspective, Kinder Morgan and Enterprise are very similar

They are also very similar when it comes to the size of their asset portfolios, which are among the largest in North America

But they aren't interchangeable

Why most investors will ly prefer Enterprise Mid investments are generally considered for the reliable income they vide to investors

The lofty dividend yields of both Kinder Morgan and Enterprise are part of that story

However, there's a back history that investors shouldn't ignore

Enterprise increased its distribution

To be fair, it was the right move for the company, but it was a terrible outcome for income investors

The cash freed up from the dividend cut was used to strengthen Kinder Morgan's balance sheet and to invest in growth opportunities

So the cut made the stronger, with management eventually getting dividend growth back on track

But even here there was a blem

In other words, Kinder Morgan has let dividend investors down during each of the most recent energy industry downturns

Erring on the side of caution will be the best choice for most investors In fact, at this point, Enterprise has reliably increased its distribution year in and year out for 26 consecutive years

But if being able to trust how the management teams of the investments you own address what's important to you, Enterprise will be the better investment option

And you'll collect a higher yield while you're at it

Reuben Gregg Brewer has no position in any of the stocks mentioned

The Motley Fool has positions in and recommends Kinder Morgan

The Motley Fool recommends Enterprise ducts Partners

The Motley Fool has a disclosure policy.