First look at Energy Transfer Partners (ETP).

Bonds outstanding: $7.7 billion.  There are there a bunch on bonds due in the next decade.


What the company does – Energy Transfer Partners is a master limited partnership primarily engaged in natural gas transportation and storage. The partnership operates more than 17,500 miles of natural gas gathering and intrastate transportation pipelines in Texas and Louisiana and the 2,500-mile Transwestern interstate pipeline. Energy Transfer Partners is also the third-largest retail marketer of propane in the United States, serving more than a million customers across the country.

Morningstar’s take – Energy Transfer has grown into one of the largest master limited partnerships through a steady buildout of large-diameter natural gas pipelines and a few transformative acquisitions. Energy Transfer’s Texas intrastate pipeline system is a phenomenal machine for moving gas around and out of Texas, and its interstate pipelines only increase market access and fee-based cash flows. With the LDH acquisition, however, Energy Transfer has now entered the natural gas liquids business. We think this shift in strategy could lead to considerable growth opportunities for the partnership.

DIVIDEND RECORD – Energy Transfer Partners has been a dividend grower since 1997, but the payout ratio has grown to over 100%.  The dividend hasn’t grown since 2008 Q3.

Dividend: $0.89 quarterly

Dividend yield: 7.2%

Dividend payout ratio: 263% using the most recent EPS ($3.56 annual dividend / $1.35 TTM EPS) or 168% using the average adjusted EPS ($3.56 / $2.12 avg. adj EPS)


EARNING POWER – $2.12 six year average earnings per share

(Earnings adjusted for changes in capitalization)


Net income


Adjusted EPS



$516 M

109 M




$676 M

133 M




$550 M

147 M




$426 M

168 M




$229 M

189 M




$271 M

209.59 M



Net income


Adjusted EPS

2010 Q4


$127 M

192 M


2011 Q1


$140 M

195 M


2011 Q2


$42 M

210 M


2011 Q3


($38 M)

209.59 M


2011 total (est)


$271 M

209.59 M


Six year average adjusted earnings per share is $2.12

Consider contrarian buying below $16.96 (8 times average adjusted EPS)

Consider value buying below $25.44 (12 times average adjusted EPS)

Consider speculative selling above $42.40 (20 times average adjusted EPS)

Energy Transfer Partners is currently trading at 22.6 times average adjusted EPS.  This stock is speculatively priced.

BALANCE SHEET – ETP has a weak balance sheet


Book value per share: $24.59 ($5,153 M in equity / 209.59 M shares)

Price to book value ratio: 1.95 (under 1.0 is good)

Current ratio: 0.84 (over 2.0 is good)

Quick ratio: 0.53 (over 1.0 is good)

Debt to equity ratio: 1.49 (lower is better)

CONCLUSION – Energy Transfer Partners (ETP) is a high dividend stock, but it is not earning enough money to sustain the dividend at its current rate.  The company has an earning power of $2.12 per share @ 209.59 million shares.  At a current stock price of 47.98 is it speculatively priced at 22.6 times average adjusted earnings.  Lastly, it balance sheet is weak.  This stock shouldn’t be bought above $25.00 per share.  It will probably suffer a dividend cut and drop back to that price.  You can buy it then for much cheaper and less downside risk.


DISCLOSURE – I don’t own Energy Transfer Partners (ETP).

Subscribe today for free at to discover high dividend stocks with earning power and strong balance sheets.

Be seeing you!

Published in: on January 19, 2012 at 2:42 pm  Leave a Comment  

The URI to TrackBack this entry is:

RSS feed for comments on this post.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: