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Valuentum Commentary
May 12, 2025
Energy Transfer’s Distributions Covered By Free Cash Flow
Image Source: TradingView. Energy Transfer’s distributable cash flow attributable to partners, as adjusted, for the three months ended March 31 was $2.31 billion, compared to $2.36 billion in last year’s quarter. Total distributions to be paid to partners was $1.1 billion in the quarter. Free cash flow in the quarter, calculated as cash flow from operations less all capital spending, was $1.69 billion, which covered distributions paid during the period. We continue to like Energy Transfer as an idea in the High Yield Dividend Newsletter portfolio. May 6, 2025
Magnificent 7 Earnings Reports Not Bad Thus Far
Shortly after Trump's Liberation Day, where the President unveiled lofty tariffs on numerous countries, we released our wait-and-see outlook for the equity markets, which thus far has proven to be the right move, with the markets largely recovering from the depths reached in April. The S&P 500, for example, is down just 3.3% year-to-date, excluding dividends. A lot has happened since Liberation Day, including easing of tariffs to a 10% baseline for most, if not all, countries, with the key exception of China, where tariffs remain extremely elevated and prohibitive. Many countries are now reportedly negotiating trade agreements with the White House, and we expect China to be added to that list soon, even if a full US/China trade agreement won't be completed in the near term, as full-scale trade deals take time to mold. Thus far, we have been impressed by earnings this season, particularly by the Magnificent 7. Apr 25, 2025
Dividend Increases/Decreases for the Week of April 25
Let's take a look at firms raising/lowering their dividends this week. Apr 4, 2025
Trump Tariffs Higher than Expected; What We're Doing
The Trump tariff increases came in larger than what we were expecting, and it remains to be seen how they will flow through the global economy, as we monitor potential retaliatory tariffs from other countries. As it relates to the equity markets, we’re taking a wait and see approach at the moment as we monitor new policy changes related to trade, immigration, fiscal (tax), and regulations. In short, we’re not overreacting to the sell off as we won’t have a great handle on the tariff impact to companies for a few quarters when they report results post-tariff increases. That said, we’re expecting continued market volatility, with meaningful risk to the downside, before trade uncertainty alleviates in the coming months. Feb 22, 2025
Energy Transfer Now Covers Distributions with Free Cash Flow
Image Source: Energy Transfer. Energy Transfer announced a quarterly cash distribution of $0.3250 per common unit during the fourth quarter (3.2% higher than the fourth quarter of 2023), a distribution that was well-covered by distributable cash flow in the period. At the end of the quarter, Energy Transfer had $2.21 billion of available borrowing capacity. For 2024, Energy Transfer hauled in $11.5 billion in cash from operating activities and spent $4.2 billion in capital expenditures, resulting in free cash flow of $7.3 billion, in excess of the $6.4 billion it distributed to partners, noncontrolling interests, and redeemable noncontrolling interests. We like Energy Transfer’s newfound free cash flow coverage of the payout. Jan 31, 2025
Dividend Increases/Decreases for the Week of January 31
Let's take a look at firms raising/lowering their dividends this week. Nov 7, 2024
Energy Transfer Now Covers Distributions with Traditional Free Cash Flow
Image: Energy Transfer’s units have done quite well the past couple years, as the pipeline giant now covers distributions with traditional free cash flow. For the nine months ended September 30, Energy Transfer generated $8.9 billion in cash flow from operations, as it spent $2.7 billion in capital expenditures, resulting in traditional free cash flow generation of $6.2 billion, which is well in excess of its distributions to partners, noncontrolling interests, and redeemable noncontrolling interests of $4.9 billion. Energy Transfer ended the third quarter with $299 million in cash and total debt of $59.3 billion. We liked Energy Transfer’s third quarter results, and we’re huge fans of its newfound ability to cover distributions with traditional free cash flow. Nov 1, 2024
Dividend Increases/Decreases for the Week of November 1
Let's take a look at firms raising/lowering their dividends this week. Oct 17, 2024
Kinder Morgan’s Dividend Is Much Healthier These Days
Image: Kinder Morgan’s shares have done quite well thanks to improved free cash flow performance. Year-to-date Kinder Morgan's free cash flow, as measured by cash flow from operations less all capital spending, totaled $2.27 billion, higher than the $1.92 billion it paid in cash dividends during the same time period. Years ago, Kinder Morgan’s capital spending and cash dividends paid were significantly higher than cash flow from operations, necessitating a dividend cut. Things are much different these days, as Kinder Morgan’s free cash flow covered cash dividends paid by $353 million during the first nine months of the year. Though the firm retains a large net debt position, Kinder Morgan’s dividend is much healthier than it was years ago. Shares yield 4.6% at the time of this writing. Sep 9, 2024
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