Why Buy ETP? 3 Reasons

By Joel South – Jan 20, 2013 at 12:22PM

NYSE: ETP

Energy Transfer Partners, L.P.

This midstream is expanding big into oil, and raking in guaranteed cash flow.

In the following video, Joel South gives investors three compelling reasons to invest in Energy Transfer Partners.

First, ETP is no longer just a natural gas midstream play. With a two-year, $3.1 billion business expansion and the acquisition of Sunoco, ETP has oil pipelines to Eagle Ford shale oil and exposure to Utica and Marcellus shale gas.

Second, the company is moving toward fee-based contracts. This guarantees cash flow, which in turn helps reduce borrowing costs. Other companies have successfully used this business model; ETP should benefit as well.

And finally, corporate management has made growing its distributions a priority. While currently paying a 7.6% yield, ETP hasn't increased its distribution rate since 2008. With its business expansion, Sunoco acquisition, and fee-based business model, ETP should increase its distribution rate in the future.

Joel South has no position in any stocks mentioned. The Motley Fool recommends Enterprise Products Partners and Kinder Morgan and owns shares of Kinder Morgan. 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.