Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Get Behind This $1 CEO

In today's era of over-inflated CEO compensation, a $1 CEO can garner plenty of attention. Larry Page, John Mackey, and Meg Whitman all have received press for running huge companies for a buck a year. One of the lesser known $1 CEOs, Kelcy Warren, has quietly led midstream master limited partnership Energy Transfer Partners (NYSE: ETP  ) on that same annual salary. He prefers to be compensated the same way his shareholders are, by dividends and units in Energy Transfer and its general partner, Energy Transfer Equity (NYSE: ETE  ) .

Getting paid
Warren's compensation is tied directly to the performance of these two companies. Though he receives no annual stock awards, he is currently the largest stakeholder in Energy Transfer Equity, holding more than 20% of the common units. Because ETE holds the general partner stake in ETP, Warren has an incredibly vested interest in the performance of ETP.

Warren volunteered to receive an annual salary of $1, plus the costs of payroll deductions and health and welfare benefits, which in 2011 amounted to $3,240. Make no mistake, because of his large holding in ETE Warren is a billionaire, but he will not create any headaches for investors over exorbitant pay packages.

Show ME the money
Instead of creating headaches for investors, Warren has been working to create value. Over the past four years, ETP has taken some flak for holding its distribution payout steady in favor of spending cash to grow the business. As a result of heavy spending on organic growth projects -- some $2 billion this year alone -- and none on distribution growth, units of ETP have languished and are down over 5% year to date.

Many analysts expect the partnership to begin increasing its distribution as early as 2013. Once that happens, don't be surprised to see investors flocking to ETP again. In the meantime, we will have to somehow make do with a steady 8% yield.

Looking ahead
Obviously, the reality of a distribution increase depends not on analysts hopes and dreams, but on Energy Transfer Partners' ability to secure additional distributable income. The partnership has really pushed to develop its portfolio, both through the organic growth projects mentioned above and acquisitions.

Integrating assets can prove challenging, but Kelcy Warren and his management team have done it all before. ETP has successfully integrated eight major acquisitions since 2004. Warren has 25 years of experience in the industry, and while he has only been at the helm of ETP since 2007, COO Marshall McCrea has been with ETP since 1997, and that kind of tenure is important.

Here is a brief rundown of some of the recent changes Warren has spearheaded at ETP aimed at bettering the business and growing distributable income:

  • The Sunoco (NYSE: SUN  ) acquisition: Expected to close by year's end, it adds crude oil assets to ETP's footprint for the first time.
  • Citrus pipeline acquisition: ETP picked up a 50% stake in this pipeline via ETE's acquisition and the ensuing drop down. The line runs from Texas into Florida and represents a move to geographically diversify ETP's assets.
  • Greater emphasis on fee-based business: ETP jointly acquired LDH Energy with Regency Energy Partners (NYSE: RGP  ) in May of last year. Fee-based contracts mitigate commodity risk, providing more reliable revenue streams.
  • Push for organic midstream growth: Approximately $3 billion in announced projects since 2010. Most of them will come online by the end of this year.

As this new income begins to roll in, ETP will be positioned nicely to begin increasing its distributions again, as well as continuing to make smart decisions about growing its business.

Foolish takeaway
Merely accepting a $1 salary will not guarantee the success of your company, but it is very much a symbolic gesture that not every CEO is willing to make. Kelcy Warren has aligned himself firmly with shareholder interests, and I'm confident enough in his leadership and decision-making ability to head over to Motley Fool CAPS and give a thumbs-up to both Energy Transfer entities.

There is a lot of focus on the future of ETP's shareholder return right now. The company is not alone on this one -- click here to check out nine more companies with great dividends, handpicked by Motley Fool analysts.

Fool contributor Aimee Duffy holds no position in any company mentioned. Click here to see her holdings and a short bio. If you have the energy, check out what she's keeping an eye on by following her on Twitter, where she goes by @TMFDuffy.

The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

Read/Post Comments (1) | Recommend This Article (7)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 26, 2012, at 11:34 PM, shamapant wrote:

    There are a few posts on that aren't generic formula based posts. These posts are real actionable investing theses that are logically presented and push me to put a stock on my watch-list. I loved this article, and I love the idea. Great work.

Add your comment.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2032861, ~/Articles/ArticleHandler.aspx, 10/27/2016 1:05:13 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,203.14 3.81 0.02%
S&P 500 2,137.41 -2.02 -0.09%
NASD 5,230.78 -19.49 -0.37%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/27/2016 12:49 PM
ETE $15.50 Down -0.25 -1.59%
Energy Transfer Eq… CAPS Rating: ***
ETP $35.80 Down -0.51 -1.41%
Energy Transfer Pa… CAPS Rating: ***
RGP.DL $0.00 Down +0.00 +0.00%
Regency Energy Par… CAPS Rating: **
SUN $28.80 Up +0.39 +1.37%
Sunoco CAPS Rating: ***