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Just a few days ago I published my bullish article on Energy Transfer (NYSE:ET) entitled Energy Transfer To Boost Unitholder Returns Very Soon, in which I made a calculated guess (based on progress on
Energy Transfer Hikes Its Distribution: Expect More To Come
Summary
- Energy Transfer has finally reached its target leverage ratio of 4.0x-4.5x debt-to-EBITDA.
- As a first step to return additional value to unitholders, Energy Transfer hiked its distribution by 15% for Q4 2021.
- Future increases to the distribution level will be evaluated quarterly, while balancing the partnership’s leverage target, growth opportunities and unit buybacks.
- The ultimate goal is to restore distributions to the pre-pandemic level of $0.305 per quarter, or $1.22 on an annual basis. Based on yesterday's closing price of $9.29, this equates to a whopping pro forma distribution yield of ~13.1%.
- This will eventually lead to a rerating of Energy Transfer's units. Based on the $1.22 distribution level, I expect units to trade at a yield of no more than 8%, suggesting a unit price of $15.25 (more than 50% upside).
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