Energy Transfer LP Stock: 9.5%-Yielder Trading at Record Level, Up 13.5% in 2023
ET Stock’s Dividend Hiked for 5 Straight Quarters
Energy Transfer LP (NYSE:ET), a diversified midstream energy company, has been running on all cylinders. The partnership recently reported wonderful fourth-quarter 2022 financial results and announced an impressive outlook for 2023. Best of all, thanks to tailwinds in the U.S. energy sector, Energy Transfer stock has been able to provide investors with reliable, growing, ultra-high-yield dividends.
In February, the company paid a quarterly distribution of $0.305 per unit, for a current yield of about 9.5%. That was the company’s fifth consecutive quarterly distribution increase. This represents a 15% increase over the $0.265 the partnership paid out in the fourth quarter of 2022 and a 74% increase over the $0.175 it paid out in the first quarter of 2022. (Source: “Distribution History,” Energy Transfer LP,” last accessed March 7, 2023.)
With a payout ratio of just 62.1%, there’s every reason to believe that additional dividend hikes are on the table for ET stock in 2023. Management has said their goal is to get the company’s distributions back up to their pre-pandemic level of $0.35 per quarter.
About Energy Transfer LP
So, what does Energy Transfer LP do? The company moves crude oil and natural gas products through nearly 120,000 miles of pipelines from wellheads to refining, terminal, storage and distribution points. The company has a strategic footprint in 41 states, including all of the major U.S. production basins. (Source: “Energy Transfer Reports Strong Fourth Quarter 2022 Results And Announces 2023 Outlook,” Energy Transfer LP, February 15, 2023.)
Stretched out, the partnership’s pipeline network could circle the Earth almost five times.
Energy Transfer LP is responsible for transporting 30% of the U.S. natural gas produced and 35% of the U.S. crude oil produced. On top of that, the company exports more natural gas liquid (NGL) than any other company or country, capturing about 20% of the global NGL market.
It’s also 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.
Energy Transfer LP also owns Lake Charles LNG Company, LLC; the general partner interests, incentive distribution rights, and about 34% of the outstanding common units of Sunoco LP (NYSE:SUN); and the general partner interests and approximately 47% of the outstanding common units of USA Compression Partners LP (NYSE:USAC).
Superb Fourth-Quarter Financial Results
For the fourth quarter of 2022, Energy Transfer LP reported revenues of $20.5 billion, a 10% increase over the $18.6 billion reported for the same prior-year period. (Source: Ibid.)
The partnership’s fourth-quarter 2022 operating income climbed to $1.8 billion (from $1.7 billion in the fourth quarter of 2021). Its quarterly net income climbed by 28% year-over-year to $1.0 billion, or $0.34 per share. Its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) were $3.4 billion in the fourth quarter of 2022, compared to $2.8 billion in the fourth quarter of 2021. The company’s distributable cash flow, as adjusted, was $1.9 billion in the fourth quarter of 2022, versus $1.6 billion in the fourth quarter of 2021.
During the fourth quarter of 2022, Energy Transfer LP’s assets continued to reach various new milestones.
The company’s NGL fractionation volumes went up by seven percent in the fourth quarter and set a new record. Its NGL transportation volumes went up by five percent, also setting a new record. Its midstream throughput volumes increased by 32%, also setting a new record. Its crude oil transportation and terminal volumes went up by 11% and 13%, respectively. Its NGL exports from its Nederland terminal set a new record.
In December 2022, Energy Transfer LP put the Gulf Run pipeline into service. The large-diameter pipeline runs from the Haynesville Shale to the Carthage and Perryville natural gas hubs and key markets along the Gulf Coast. The company also put the Grey Wolf processing plant into service that month.
During the fourth quarter, the partnership increased the total underground NGL storage capacity at its Mont Belvieu storage facility to about 60 million barrels. Moreover, it invested $605.0 million in growth capital expenditures.
During the full year, Energy Transfer LP reduced its long-term debt by approximately $800.0 million.
Management has provided strong guidance for 2023. They forecast adjusted EBITDA in the range of $12.9 to $13.3 billion and growth capital expenditures in the range of $1.6 to $1.8 billion. Management says a significant amount of the company’s 2023 growth capital will be spent on projects that are expected to contribute cash flow before the end of this year.
Strong Share-Price Performance
As explained above, yield hogs can find solace in Energy Transfer LP stock’s inflation-crushing dividends. Investors can also find warm comfort in the company’s market-thrashing share-price gains. As of this writing, ET stock is up by:
- 13.5% year-to-date
- 20% over the last six months
- 38% year-over-year
Chart courtesy of StockCharts.com
The Lowdown on Energy Transfer LP Stock
Energy Transfer LP is one of the best energy plays right now. The company has a solid balance sheet and is growing its infrastructure with new projects that are slated to contribute to its cash flow by the end of this year.
Thanks to its recent acquisitions and higher volumes across all of its core business segments, the partnership was able to report tremendous fourth-quarter 2022 results, increase ET stock’s ultra-high-yield dividend, and provide strong guidance for 2023.