Why Energy Transfer Partners LP Stock Is Going Nowhere in 2014

Energy Transfer Partners is missing out on the MLP run in 2014. Here’s a look at what’s going on this year.

Sep 1, 2014 at 9:45AM

For the first time since 2011, the Alerian Index, which tracks 50 master limited partnerships, is outperforming the S&P 500. It's impressive, especially given that the index doesn't include young upstart MLPs like Emerge Energy Services or Hi-Crush Partners, which, year to date, are up 216% and 73%, respectively. Even units of lumbering-yet-reliable MLPs like Enterprise Products Partners are enjoying banner years, which makes 2014 that much more painful for unit holders of Energy Transfer Partners. This stock has gone nowhere this year, and may be poised to go nowhere for the rest of the year. Let's take a closer look.

ETP Chart

ETP data by YCharts.

At the time of this writing, Energy Transfer Partners is up less than 1% year to date. Despite being "cheap" relative to its peers, analysts rate it a buy, and posting a strong yield of 6.7%, the market does not have any love for this MLP.

Part of the reason investors won't buy Energy Transfer Partners is because there are better options for growth, and better options for reliability. Let's look at growth first. Here is a look at five years of revenue and distribution growth for Energy Transfer Partners and Magellan Midstream Partners:

ETP Revenue (Annual) Chart

ETP Revenue (Annual) data by YCharts.

Clearly, Magellan is able to turn revenue growth into distribution growth, while ETP is not.

Now let's have a look at reliability. Here's the 10-year distribution history for Energy Transfer Partners compared to Enterprise Products Partners:

ETP Dividend Chart

ETP Dividend data by YCharts.

Enterprise has increased its distribution every quarter for the last nine years, including straight through the recession. That is the mark of reliability.

Magellan and Enterprise have both grown revenue and distributions at a relatively steady pace, but that is not the case with Energy Transfer Partners, which used a major acquisition to drive revenue growth, and is only now able to raise its distribution after a five-year hiatus. Unsurprisingly, the history bears out in unit price performance: Magellan is up 33% year to date, while Enterprise is up 20%. Investors are clearly more interested in reliable distribution growth than whether or not Energy Transfer Partners is cheap, despite nearly everyone agreeing that it is in fact, dirt-cheap right now.

A lackluster history might explain why ETP has done poorly so far, but what does the future hold? Right now, it's a big game of wait-and-see. Here are just a few potential projects coming down the pike for Energy Transfer:

That is a significant slate, and at another MLP, that might be enough to generate investor enthusiasm, but at Energy Transfer, these are just impressive question marks. Will they come to fruition? The LNG export terminal is perhaps the biggest question mark there. Will they generate the expected revenue? And if so, will management be able to turn that into impressive distribution growth?

Frankly, Energy Transfer's management team doesn't have the track record of execution that other management teams have, so despite these growth initiatives, and despite the improved operational and geographic diversity ETP has attained over the last five years, investors remain hesitant.

Bottom line
Energy Transfer Partners' future may be brighter than its past, but investors can't be blamed for sitting on the sidelines until distribution growth ramps up and management proves it can deliver strong, sustainable results over time.

Top dividend stocks for the next decade
The smartest investors know that dividend stocks simply crush their non-dividend paying counterparts over the long term. That's beyond dispute. They also know that a well-constructed dividend portfolio creates wealth steadily, while still allowing you to sleep like a baby. Knowing how valuable such a portfolio might be, our top analysts put together a report on a group of high-yielding stocks that should be in any income investor's portfolio. To see our free report on these stocks, just click here now.

Aimee Duffy has no position in any stocks mentioned. The Motley Fool recommends Enterprise Products Partners and Magellan Midstream Partners. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers