In a very uncertain and volatile market, two things seem quite sure. One is that interest rates are likely to stay low for the foreseeable future, and the second is that investors are going to be continually searching for ways to create income and relative stability in their portfolios. One possible solution for income and stability is Energy Transfer Partners (ETP). This company owns and operates extensive natural gas pipelines which are used to gather and transport the fuel across states like Alabama, Arizona, Arkansas, Colorado, Florida, Louisiana, Mississippi, New Mexico, Utah, West Virginia and Texas. For a number of reasons, it could now be an ideal time to consider this stock for relative stability and its high-yielding dividend:
1) Energy Transfer Partners recently agreed to acquire Sunoco (SUN) in a deal valued at about $5.3 billion. This will greatly expand the size and operations of the company, but the deal has put some pressure on the stock at least in the short-run. In the long-run, it looks like a smart move because it will allow Energy Transfer Partners to diversify further into oil, which could lead to more stability and higher profits.
2) Energy Transfer Partner shares were trading for about $50 in early May, but a correction in energy stocks and news that the company would be selling about 13.5 million shares of stock in a secondary offering price at $44.57, helped push the stock lower. The company sold the shares to help pay for the Sunoco deal, which should add growth potential in the future.
3) With the stock trading at about 10% off the recent highs of $50, it could be an ideal time to accumulate dips. The 8% dividend yield is very generous, and investors might be poised to push the stock back up to $50, which would still imply a 7% yield. This compares very favorably with other limited partnerships in this sector and it is much higher than the average dividend stock in the S&P 500 Index which currently yield just over 2%.
Here are some key points for ETP:
Current share price: $44.72
The 52 week range is $38.08 to $51
Earnings estimates for 2012: $1.76 per share
Earnings estimates for 2013: $2.28 per share
Annual dividend: $3.58 per share which yields 8%
Data is sourced from Yahoo Finance.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.