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Energy Transfer Partners LP: Somebody Is Wrong

Apr. 06, 2018 9:11 AM ETEnergy Transfer LP (ET)194 Comments


  • Much debate has occurred around Energy Transfer Partners LP and its 13%+ yield.
  • Energy Transfers bonds, on the other hand, yield ~5% -- right in line with peers such as Williams Partners and Enterprise Products Partners.
  • The bond market often represents the "smart money."
  • This can only mean one of two things: either bond investors are wrong, or Energy Transfer Partners bears are.

On April 3, David Alton Clark (head of Discovered Dividends Newsletter) released his latest article to Seeking Alpha's readership: Oversold MLP To Buy Now: 14% Yield, 40% Upside, Asymmetric Risk/Reward, Solid Coverage.

It’s well worth a read. Its concisely reviews all the high-level facts that add up to one thing: Energy Transfer Partners LP (ETP) with its 13.65% yield is a buy.

Mr. Clark makes a strong case. And in the interests of furthering the public debate about this high-yield stock, what follows is my modest contribution. I won’t rehash the tale (Mr. Clark does an excellent job), instead focusing on key points and the company’s publicly-stated plans for the future.

You see, stock market investors can debate the merits of a stock whose yield crushes the long-term returns of the stock market until everyone is blue in the face. But there is a third party with an (incredibly valuable) voice in the affairs of any corporation: bond investors.

One of these Energy MLP’s is not like the others…

First, here are a few key financial ratios for Enterprise Products Partners and four of its peers:


Dividend Yield

Interest Coverage

Energy Transfer Partners LP




Enterprise Products Partners LP




Enbridge Inc




Kinder Morgan Inc



Williams Partners LP




Source: Morningstar.

As the famous Sesame Street segment goes, “One of these things is not like the other.”

Energy Transfer trades for a sizable discount to its peers. There could be any number of reasons for this, which is why I went to the bond market to see what the credit-quality focused money lenders had to say:

Bond Description


Latest Trade Price

Yield to Maturity


8.25% US Corporate Debenture

ChartETP Free Cash Flow (Annual) data by YCharts

This article was written by

At Western Reserve Strategies, we don't just want to be right. We want to know why. Twitter: @WestResStrat

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in ETP over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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