In the following video, Joel South gives investors three things to think about regarding investing in or selling Energy Transfer Partners.
First, ETP hasn't increased its distributions since 2008, probably because of the Sunoco acquisition and a $3.1 billion company buildout since 2010. However, companies such as Plains All American have also made acquisitions and built out their companies but also increased their distributions. Why hasn't ETP done likewise?
Second, ETP has greater exposure to commodity prices than other pipeline companies do. While most competitors use a fee-based business model to insure cash flow, ETP has only recently moved toward this model.
Third, for all its acquisitions and buildout efforts, there's no tangible proof of increased cash flow. The Sunoco acquisition, for example, should help in this regard, but so far it hasn't had much impact on corporate revenues.
Joel South has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Kinder Morgan. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.