6 Reasons Energy Transfer Equity Should Be In Your Income Portfolio

Apr.15.12 | About: Energy Transfer (ETE)

The United States has undergone an energy renaissance over the past five years. Massive new natural gas finds have driven NG prices to their lowest point in a decade and oil production has shown its fastest growth in over a generation. One sector that is benefiting greatly from these developments and provides excellent yields for dividend investors is the Energy MLP's that gather and transport natural gas. An excellent MLP to own for its robust and growing yield and its positive growth prospects is below.

Energy Transfer Equity (NYSE:ETE)

Business description from Yahoo Finance (see here):

Energy Transfer Equity, L.P., through its direct and indirect investments in the limited partner and general partner interests in Energy Transfer Partners, L.P., engages in midstream, intrastate, and interstate transportation of natural gas, as well as in storage of natural gas in the United States.

6 reasons ETE should be a core holding for dividend investors at $39 a share:

  1. The stock yields 6.3%. More importantly, it has grown its distribution payouts by over 10 times since it first quarterly payment in May 2006.
  2. It has completed the merger with Southern Union which means they now own pipelines that deliver 2/3's of the natural gas to fast growing Florida.
  3. For a high yielder, it is significantly below analysts' price targets. The median price target by the 7 analysts that cover the stock is $47.
  4. Consensus earnings estimates for FY2012 and FY2013 have popped (over 50% for FY2012) in the last seven days.
  5. Operating cash flow almost doubled from FY2009 to FY2011 and the company is not negatively impacted by declining natural gas prices.
  6. Revenue growth projections for ETE are robust. Consensus sales growth is for over 25% in FY2012 and over 10% in FY2013. This 6% plus yielder also goes for just 14 times forward earnings and just over 1 times annual revenues.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in ETE over the next 72 hours.