Tags: energy | MLP | income | ETE

Energy Transfer Equity: MLP Income

By    |   Tuesday, 06 Dec 2011 03:12 PM

Energy Transfer Equity (ETE) provides investment exposure to the natural gas transport and processing businesses with a diverse portfolio of holdings. The main assets of the company are ownership positions in two publicly traded master limited partnership (MLP) firms, offering an income play as potential for growth.

Energy Transfer Equity owns the general partnership units and incentive rights of Energy Transfer Partners (ETP) and Regency Energy Partners (RGP) plus 50 million ETP limited partnership units and 26 million RGP limited partnership units. Both Energy Transfer Partners and Regency Energy Partners are involved in the gathering, transport and processing of natural gas, with the majority of company operations located in Texas.

The general partnership interest of Regency Energy Partners was purchased from GE Energy Financial Services in May 2010. The Regency holdings are considered to be a growth asset for Energy Transfer Equity but currently provide only about 10 percent of the cash distribution received from the different partnership holdings.

Dividend vs. growth

The choice of the general partnership interests, such as Energy Transfer Equity over the limited partnership interest, is usually a choice of distribution growth vs. a current high yield. The Energy Transfer Partnership units are currently paying an annual distribution of $3.575, producing a dividend yield of more than 8 percent.

ETP has been paying this distribution rate since the second quarter of 2008. Energy Transfer Equity shares currently yield 7 percent on a $2.50 annual distribution rate. However, the ETE annual payout has increased from $1.92 at the second quarter of 2008.

In October, the Energy Transfer companies announced the sale of the propane retail division of the company to Amerigas Partners (APU) for $2.9 billion in a cash and units deal. Cash proceeds will be used to reduce ETP’s debt levels.

The analysts at Morgan Keegan & Company recently reiterated their outperform rating on ETE but lowered their target price by $2. The target is still 40 percent above recent share prices.

The company reports next on Feb. 16.

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Energy Transfer Equity (ETE) provides investment exposure to the natural gas transport and processing businesses with a diverse portfolio of holdings. The main assets of the company are ownership positions in two publicly traded master limited partnership (MLP) firms,...
energy,MLP,income,ETE
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2011-12-06
Tuesday, 06 Dec 2011 03:12 PM
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