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Energy Transfer’s Distributions Covered By Free Cash Flow

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Image Source: TradingView By Brian Nelson, CFA Energy Transfer (ET) recently reported mixed first quarter results with revenue coming up short of expectations, but GAAP earnings per share coming in line with the consensus forecast. The pipeline giant reported net income for the three months ended March 31 of $1.32 billion, which compares to $1.24 billion in the same three months last year. Adjusted EBITDA for the first quarter was $4.1 billion compared to $3.88 billion in the same period a year ago. On an operational basis, interstate natural gas transportation volumes increased 3%, setting a new partnership record. Crude oil transportation volumes were up 10%, while NGL transportation volumes were up 4% and NGL and refined products terminal volumes … Read more

Magnificent 7 Earnings Reports Not Bad Thus Far

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By Brian Nelson, CFA   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 (SPY), 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 … Read more

Trump Tariffs Higher than Expected; What We’re Doing

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By Brian Nelson, CFA 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 … Read more

Energy Transfer Now Covers Distributions with Free Cash Flow

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Image Source: Energy Transfer By Brian Nelson, CFA Energy Transfer (ET) recently reported fourth quarter results that were shy of Street expectations. Net income attributable to partners for the three months ended December 31 2024 was $1.08 billion, or $0.29 per unit. Adjusted EBITDA for the three months ended December 31, 2024 was $3.88 billion compared to $3.6 billion for the same period a year ago, an increase of 8%. Distributable cash flow attributable to partners, as adjusted, for the quarter was $1.978 billion, or $0.57 per diluted unit. Growth capital spending was $1.22 billion in the fourth quarter, while maintenance capital expenditures were $309 million. Energy Transfer’s volumes performed well in the quarter. Crude oil transportation volumes were up … Read more

Energy Transfer Now Covers Distributions with Traditional Free Cash Flow

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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.  By Brian Nelson, CFA Energy Transfer (ET) reported decent third quarter results November 6, even though the midstream energy company missed estimates on both the top and bottom lines. On a diluted basis, net income per common unit advanced to $0.32 from $0.15 in the year ago period. Adjusted EBITDA came in at $3.96 billion compared to $3.54 billion in the three months a year ago. Distributable cash flow for the three months ended September 30 was $1.99 billion, a $4 million increase on a year-over-year basis and in excess of the $1.1 billion in total … Read more

Kinder Morgan’s Dividend Is Much Healthier These Days

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Image: Kinder Morgan’s shares have done quite well thanks to improved free cash flow performance. By Brian Nelson, CFA On October 16, pipeline giant Kinder Morgan (KMI) reported weaker than expected third quarter results, with both revenue and non-GAAP earnings per share coming in lower than what the Street was looking for. Adjusted EBITDA expanded 2% in the third quarter on a year-over-year basis, while net income attributable to KMI came in at $625 million, higher than the $532 million mark it posted in the year-ago quarter. Third quarter earnings per share was up 17% compared to the same period last year, but adjusted earnings per share of $0.25 and distributable cash flow of $0.49 per share were flat on … Read more

Energy Transfer Raises 2024 Adjusted EBITDA Guidance, Units Yield 7.8%

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Image Source: Energy Transfer By Brian Nelson, CFA Energy Transfer (ET) reported strong second quarter results on August 7. Net income attributable to partners totaled $1.31 billion in the quarter, up from $911 million in the same quarter a year ago. Net income per common unit on a diluted basis expanded to $0.35 from $0.25 in last year’s quarter. Adjusted EBITDA in its June quarter was $3.76 billion compared to $3.12 billion for the same three months of last year. Distributable cash flow [DCF] to partners came in at $2.039 billion in the quarter compared to $1.554 billion in last year’s period. Total distributions to be paid to partners was $1.1 billion in the quarter, translating into excellent distribution coverage … Read more

3 High Dividend Yielders for Consideration

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Image: Energy Transfer, Philip Morris, and Altria have outperformed the SPDR S&P 500 Dividend ETF (SDY) since the beginning of 2024. By Brian Nelson, CFA The market remains laser-focused on inflation readings and employment trends – two of the main dynamics that influence policy at the Federal Reserve. Since the beginning of 2024, the market has ratcheted down expectations of rate cuts from as many as 5 or 6 to just 1 or 2 in 2024. With yields on risk-free instruments poised to go lower soon, a focus on high yielding equities may be appropriate for the income investor. Here are three high dividend yielders that we like for consideration. Energy Transfer (ET) Midstream pipeline operator Energy Transfer has come … Read more

High Yield Dividend Income Investing Is Not as Easy as Chasing the Highest Yield

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Dear members: — The skills to successfully invest for long-term capital gains or long-term dividend growth are much different than those required for generating high yield dividend income. Income investing is a much different proposition. However, the skills do center on a similar equity evaluation process, but one that requires an acknowledgement and heightened awareness of considerably greater downside risks. Income investing, or high yield dividend income investing, should at times be considered among the riskiest forms of investing, as many high dividend-yielding securities tend to trade closer to the characteristics of junk-rated bonds than they do most net cash rich and free cash flow generating powerhouses that we like so much in the Best Ideas Newsletter portfolio (1) and Dividend Growth … Read more

Energy Transfer Ups Adjusted EBITDA Guidance for 2024

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Image: Energy Transfer’s financials are in much better shape than they were years ago. By Brian Nelson, CFA On May 8, Energy Transfer (ET) reported strong first-quarter 2024 results. Adjusted EBITDA for the three months ended March 31 came in at $3.88 billion, which was nicely higher than the $3.43 billion mark it achieved in the same period last year. Distributable cash flow [DCF] in the quarter came in at $2.36 billion, which was materially better than the $2.01 billion registered during the first quarter of 2023. During the first quarter of 2024, the company’s crude oil transportation volumes increased 44%, which set a new record. Crude oil terminal volumes increased 10%, NGL fractional volumes increased 11%, NGL exports increased … Read more