Energy Transfer LP Hikes Quarterly Payout 50% for Yield of 8.5%
ET Stock Up by 35% in 2022
Market conditions have been fueling significant growth in the energy sector as U.S. inventory levels fall, gasoline demand rebounds, and the appetite for risk improves. The energy sector’s outlook remains robust, despite the International Monetary Fund (IMF) warning that a global recession is nigh.
This is great news for energy stocks, including Energy Transfer LP (NYSE:ET). The diverse midstream energy partnership has seen its share price rip considerably higher in 2022 and, thanks to the company making boatloads of cash, Energy Transfer LP stock has been rewarding investors with growing, high-yield dividends.
In fact, Energy Transfer LP has raised its dividend three times in 2022. In February, the company hiked its quarterly payout by 15% year-over-year to $0.175 per unit. In May, the partnership raised ET stock’s dividend by 33% to $0.20 per unit. Then, on July 26, the company raised its distribution by 50% to $0.23 per share, for a yield of 8.5%. (Source: “Distribution History,” Energy Transfer LP,” last accessed July 28, 2022.)
The company has room for additional dividend hikes; its payout ratio is just 60.2%. Moreover, management said its ultimate goal is to get Energy Transfer LP stock’s quarterly distribution back up to its previous level of $0.35 per share.
There’s still time for investors to get in on the pay raise: ET stock’s next dividend will be paid on August 19 to unitholders of record as of the close of business on August 8. (Source: “Energy Transfer Announces Increase in Quarterly Cash Distribution,” Energy Transfer LP, July 26, 2022.)
Partly due to the company’s excellent financial results, as of this writing, Energy Transfer LP stock is trading up by:
- Four percent over the last month
- 17% over the last six months
- 35% year-to-date
- 16% year-over-year
Chart courtesy of StockCharts.com
About Energy Transfer LP
Energy Transfer LP owns and operates one of the largest and most diverse portfolios of energy assets in North America. The partnership has a strategic footprint in all of the major U.S. production basins, with operations in 41 U.S. states and in Canada. (Source: “Investor Presentation: June 2022,” Energy Transfer LP, last accessed July 28, 2022.)
The company’s core operations include the transportation, storage, and terminaling of natural gas, crude oil, natural gas liquids (NGL), refined products, and NGL fractionation.
Energy Transfer LP is the only logistics provider with export facilities on both the U.S. Gulf Coast and East Coast. Its Nederland Terminal is the largest single-owner, above-ground oil storage facility in the U.S. Through its export terminals and nearly 120,000 miles of pipelines, the company moves energy products throughout the U.S. and to more than 75 countries around the world.
Energy Transfer LP also owns the company Lake Charles LNG; the general partner interests, incentive distribution rights, and 28.5 million common units of Sunoco LP (NYSE:SUN); and the general partner interests and 46.1 million common units of USA Compression Partners LP (NYSE:USAC).
The company recently announced that it started the construction of a new 200-million cubic-feet-per-day processing plant in the Permian Basin. The plant is expected to be in service by the end of this year.
Energy Transfer LP has also announced:
- A second new processing plant in the Permian Basin
- The completion of the construction of the final phase of the Mariner East Pipeline
- The beginning of construction of the Gulf Run Pipeline project, which is expected to be complete by year-end
- The completion of Phase II of the Cushing South Pipeline, bringing the capacity to 120,000 barrels per day
- The putting into service of the Permian Bridge project, bringing the capacity to more than 200.0 million cubic feet per day
- The putting into service of the Ted Collins Link, providing additional connectivity for Energy Transfer LP’s Houston Terminal, the Gulf Coast oil pipeline network, and the Houston Ship Channel
- A definitive agreement to sell its 51% interest in Energy Transfer Canada.
The sale of Energy Transfer Canada, which is expected to close by the third quarter, is expected to result in cash proceeds to Energy Transfer LP of approximately $272.0 million and reduce the partnership’s consolidated debt by approximately $450.0 million
Energy Transfer LP Announces Strong Q1 Results & Increases 2022 Guidance
For the first quarter ended March 31, Energy Transfer LP reported net income of $1.3 billion, or $0.38 per share. (Source: “Energy Transfer Reports Strong First Quarter 2022 Results and Increases 2022 Guidance,” Energy Transfer LP, May 4, 2022.)
The partnership’s adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) were $3.3 billion in the first quarter of 2022, compared to $5.0 billion in the first quarter of 2021. The first quarter of 2021 was positively impacted by Winter Storm Uri. Excluding this contribution, the company’s first-quarter 2022 adjusted EBITDA would have increased year-over-year.
Energy Transfer LP’s adjusted distributable cash flow in the first quarter of 2022 was $2.1 billion, compared to $3.9 billion in the first quarter of 2021.
During the first quarter of 2022, the partnership had higher transportation volumes in all of its segments and a full-quarter contribution from its $7.0-billion acquisition of Enable Midstream Partners, LP in December 2021.
Given Energy Transfer LP’s wonderful first-quarter performance, as well as the increasing demand for its services, management expects the partnership’s adjusted EBITDA for full-year 2022 to be between $12.2 and $12.6 billion, up from a previous guidance range of $11.8 to $12.2 billion.
Furthermore, management expects the company’s 2022 growth capital expenditures to be between $1.8 and $2.1 billion, up from a previous guidance range of $1.6 to $1.9 billion.
The Lowdown on Energy Transfer LP Stock
High oil and natural gas prices continue to help juice Energy Transfer LP stock’s price and dividends. The high energy prices helped the partnership achieve outstanding first-quarter results and increase its dividend three times this year (so far).
Going forward, the demand for oil and gas is expected to remain robust, which has allowed the company to raise its full-year guidance.