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Stock Review of Energy Transfer Partners L.P

By Edited Jun 3, 2016 1 0

 

Energy Transfer Partners, L.P is a master limited partnership located in the U.S. They own over 24,000 miles of natural gas pipelines and they own multiple storage and treatment facilities.  Energy Transfers Partners, L.P is a publicly traded company with the ticker symbol (ETP). With a market cap of over 10 billion dollars, Energy Transfers Partners, L.P is one of the largest master limited partnerships in the country.

 Master limited partnerships, are generally considered to be safe investments. Although many of them are in the oil and gas business, they are not affected heavily by the prices of these commodities. They usually get a flat fee to transport them, and are paid based on the amount of oil/gas not on the price of oil and gas. With a beta of only .64, ETP is not very volatile and is currently performing better than the Dow Jones and S&P 500. With a recent expansion in drilling in the U.S ETP is in the position to make a ton of money. Natural Gas drilling has recently been increased and as a result, master limited partnerships, are making millions of dollars. These companies are making so much money, that they are rapidly expanding into new territories and building complex networks of pipelines to support the demand.

  ETP is expanding at a huge rate. They currently have a debt to equity ratio of just over 130. They are issuing more and more debt to expand operations. This may seem to be risky, but ETP's management knows what they are doing and has successfully expanded their business before and hopefully will do it again.  In the past few years, the company has performed exceptionally well. With revenues increasing for 3 years in a row. With a P/E ratio of about 9, ETP is also in my opinion undervalued. It is a great time to invest in this company. ETP has a 8% dividend yield and currently earns about $5.00 per share. Over 40% od the companies earnings goes towards dividends.  This is a surprisingly high number considering the fact that ETP is spending millions of dollars on expansion efforts. 

  Most of ETP's operations are located in Texas. With a complex network of pipelines, ETP has also branched out into other states like Florida and even Wisconsin. Along with pipelines, the company also stores large amounts of gas and oil for companies, and is in the refining business. With this level of diversification, ETP is doing very well.

 

My Review

I currently advise investing in Energy Transfer Partners L.P. The company is doing very well and with 2,000 employees, it makes a big impact on the oil/gas business. Unlike other companies, ETP has the infrastructure to handle the influx of drilling in Texas and throughout the U.S. One thing to consider though is that master limited partners come with tax implications. Master limited partners corporations do not pay tax at the company level. Instead investors are taxed on the dividends they receive. They are taxed at their individual tax rate. This may seem to be an issue but luckily for investors, some of the MLP income that is passed on to investors is not taxed, so some investors will actually end out doing better by buying MLP's. Even if you end up not paying much money in taxes, you still have to fill out a K-1 statement which can be time consuming. If you are uncomfortable investing directly in MLP's or do not want to deal with the tax implications, you can always invest in an Master limited partnership ETF. ALPS Alerian Master Llimited Partnership Exchange Traded Fund is an ETF for MLP's.  The ETF has the ticker symbol (AMLP). It invests solely in master limited partners. Like the companies it invests in, it too is  safe, and it performs at about the same level as ETP. For those who do not want to invest in ETP, I highly recommend checking out AMLP!

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