Energy Transfer Partners (ETP) is the largest energy MLP. It operates more than 71,000 miles of natural gas, natural gas liquids and crude and refined products pipelines across 36 states, notes Ben Reynolds, editor of Sure Dividend.
Energy Transfer Partners has declined precipitously in price over the last several years, following a corresponding decline in the price of crude oil. Now that oil prices are rebounding, the company is well positioned to deliver outsized returns to its investors, driven by its double-digit distribution yield.
While Energy Transfer Partners’ financial performance is not tied directly to oil prices, the partnership will still participate in some of this upside because rising oil prices will increase the transportation volumes of its customers, which in turn raises the MLP’s revenue.
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Secondly, Energy Transfer Partners has been investing heavily in its business even though oil prices have remained depressed for so long. This has allowed the company to acquire quality assets at bargain prices.
To sum up, there’s a lot to like about Energy Transfer Partners. The company appears extremely undervalued. If operations improve, this could catalyze the company to return closer to its historical average valuation multiple and generate additional returns for shareholders on top of growth and the company’s double-digit distribution yield.
Ben Reynolds is editor of Sure Dividend.
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