Energy Transfer Partners (ETP) represents a very attractive high-yielding undervalued income opportunity that has also generated significant above-average capital appreciation. Since calendar year 2001, long-term shareholders have enjoyed capital appreciation in excess of 10% while simultaneously receiving dividend income that is approximately double what their original investment would have been. However, there was a short period of time from 2009 to 2011 where their dividend yield was temporarily frozen.
This article is intended to look at Energy Transfer Partners' "essential fundamentals at a glance" through the lens of the F.A.S.T. Graphs™ research tool based on Funds From Operations (FFO). Therefore, rather than reinvent the wheel, we direct the readers to an article written by fellow Seeking Alpha Contributor Elliott Gue: Why Energy Transfer Partners Is Cheap: It's Complicated.
A Live F.A.S.T. Graphs on Energy Transfer Partners
The F.A.S.T. Graphs on Energy Transfer Partners illustrates that this above-average yielding Oil and Gas Storage and Transportation MLP can be purchased at a sound valuation. Therefore, we rate Energy Transfer Partners a buy based on the following fundamental metrics:
· a P/FFO of 7.2, which is below its historical normal P/FFO of 9.1
· a current yield of 8.3%, which is over 4 times the current yield on the S&P 500 of 1.9%
· a current price that sits at a discount to its income justified valuation (light purple line on graph)
Moreover, in order to conduct your own research and get a clearer perspective on Energy Transfer Partners' valuation, click on the picture above that links you to a fully functioning sample F.A.S.T. Graphs on Energy Transfer Partners and research this above-average yielding Oil and Gas Storage and Transportation MLP deeper and faster. Be sure to run this graphic utilizing the Funds From Operation (FFO) metric that is more appropriate than operating earnings for MLPs.
Run this "tool to think with" through its paces. Use the tan navigation bar to the left of the graphs and draw multiple graphs ranging from 2 to 20 years of history. Discover how this tool instantly provides a clear picture of the business behind the stock and dynamically re-evaluates valuation and reveals the clear correlation between the company's earnings and price.
Note: This link will be live for 90 days beginning October 18, 2012. For more advanced instructions on how to utilize the live graph follow this link.
Summary and Conclusions
Energy Transfer Partners is our above-average yielding Oil and Gas Storage and Transportation MLP idea of the week. At its current quotation, Energy Transfer Partners appears to be currently undervalued based on historical norms. This is a long-term call for investors seeking an above-average yield, above-average capital appreciation and a potential for a growing dividend income stream that can be purchased at an attractive price. Consequently, we believe this is a high-yielding option for investors seeking a high income and capital appreciation candidate worthy of further due diligence.
Disclosure: No position at the time of writing.
Disclaimer: The opinions in this document are for informational and educational purposes only and should not be construed as a recommendation to buy or sell the stocks mentioned or to solicit transactions or clients. Past performance of the companies discussed may not continue and the companies may not achieve the earnings growth as predicted. The information in this document is believed to be accurate, but under no circumstances should a person act upon the information contained within. We do not recommend that anyone act upon any investment information without first consulting an investment advisor as to the suitability of such investments for his specific situation.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.