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Energy Transfer Equity’s Distribution Outlook: Key for Investors

Kurt Gallon

How 3 Energy Transfer Group MLPs Performed in 3Q15

(Continued from Prior Part)

Energy Transfer Equity’s distribution outlook

Similar to Energy Transfer Partners (ETP), Energy Transfer Equity’s (ETE) distributions may continue to grow in the fourth quarter of 2015, according to Wall Street’s estimates.

ETE’s expected quarterly distribution per unit of $0.31 for 4Q15 would add up to $1.02 for the whole of 2015. This represents an impressive 36% YoY (year-over-year) rise in fiscal 2015.

ETP’s distribution growth is driven by growth in distribution income from its subsidiaries. We discussed ETE’s ownership structure in Part Two of this series.

However, after the ETE-Williams Companies (WMB) merger, this ownership structure will change. Post-merger, Williams Partners (WPZ) is expected to become the largest contributor to ETE’s cash flows, with a 54% share of total contributions. For more details, you can read A Complete Guide to the Energy Transfer–Williams Merger.

ETE-WMB transaction update

According to ETE in its 3Q15 earnings call, “We filed our Hart-Scott-Rodino application on October 20 and we expect to file shortly the draft S4 Proxy with the SEC. We remain very confident in completing the merger in the first half of 2016.”

Energy Transfer Equity’s distribution yield

ETE has a current distribution yield of 6.3%. The partnership’s impressive distribution growth guidance, stable cash flows, and strong distribution coverage are most likely the reasons for its impressive distribution yield.

ETP’s peers Williams Companies and Spectra Energy (SE) are trading at distribution yields of 7.3% and 5.6%, respectively. WMB and SE hold general partner interest in Williams Partners and Spectra Energy Partners (SEP), respectively.

ETE forms 0.52% of the Guggenheim Raymond James SB-1 Equity ETF (RYJ).

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