I continue to very positive on the energy MLP space. The United States is in the early innings of a substantial ramp up in domestic oil & gas production. In addition, natural gas is displacing coal use in this country for a variety of reasons. And of course, in our current low interest environment, the high yields in the sector are extremely attractive. My favorite pick in the overall energy MLP area continues to be Linn Energy (NASDAQ:LINE) but I like others in the industry as well. One of the behemoths in the storage & distribution area recently caught my eye due to an insider's huge recent buy and improving earnings estimates.
"Energy Transfer Equity, L.P. (NYSE:ETE) owns and operates a diversified portfolio of energy assets in the natural gas, natural gas liquids, and propane sectors in the United States." (Business description from Yahoo Finance)
6 reasons ETE should reward long term income investors at $41 a share:
- ETE yields 6.1% and has doubled its payouts in the last six years.
- A director just bought $9.5mm in new shares in two transactions at the end of June.
- The company blew through estimates last quarter and consensus earnings estimates for both FY2012 and FY2013 have gone up substantially in the last three months.
- The 7 analysts that cover the stock have a median price target of $46 on ETE. The targets range from $45 on the low side to $51 a share on the high side.
- The company almost doubled operating cash flow from FY2009 to FY2011.
- Energy Transfer Equity is executing well on an aggressive acquisition strategy that should produce major synergies. The company looks destined to be one of the major players in the industry for the foreseeable future.
Disclosure: I am long LINE.