Saturday, March 17, 2012

Energy Transfer Partners LP (ETP)

Energy Transfer Partners LP  (ETP)gathers, processes, stores and transports natural gas. mainly in Texas and surrounding states.

The partnership has grown profits and cash distributions between 10-15% over the past five years earning between 13-16% return of capital. ETP experienced difficulties in 2009-11 but should recover this year and continue to make progress as a result of:

(1) it is connected to almost every natural gas shale play in the US,

(2) acquisitions. It most recent is LDH Energy Asset Holdings,

(3) the recent sale of its propane will allow management to focus exclusively on its pipeline business.


(1) it is sensitive to fluctuations in commodity prices,

(2) volatility in the securities markets could make it harder to finance acquisitions,

(3) potentially unfavorable regulatory changes.

ETP is rated B++ by Value Line, has a debt to equity ratio of 60% and its stock yields 8.3%.

Statistical Summary

Stock Yield Dividend Growth Rate Payout Ratio # Increases Since 2004
ETP 8.3% 3% 94% 5
IND 6.5 6 114 NA

Debt/Equity ROE EPS Down Since 2004 Net Margin Value Line Rating
ETP 60% 14% 3 11% B++
IND 109 17 NA 7 NA


Note: ETP stock made good progress off its March 2009 low, quickly surpassing the down trend off its July 2007 high (straight red line) and its November 2008 trading high (green line). ETP has been in a long term up trend (blue lines) but has clearly struggled over the last six months to stay above the lower boundary of that trend. At the moment, I am paying the most attention to its intermediate term trading range (purple lines). The wiggly red line is the 50 day moving average. The High Yield Portfolio owns a full position in ETP. The stock now trades below the lower boundary of its Buy Value Range and, hence has been Removed from the High Yield Buy List. The lower boundary of its Sell Half Range in $68.

Steve Cook received his education in investments from Harvard, where he earned an MBA, New York University, where he did post graduate work in economics and financial analysis and the CFA Institute, where he earned the Chartered Financial Analysts designation in 1973. His 40 years of investment experience includes institutional portfolio management at Scudder, Stevens and Clark and Bear Stearns. Steve's goal at Strategic Stock Investments is to help other investors build wealth and benefit from the investing lessons he learned the hard way.