Stock Valuation & Dividend Analysis: Energy Transfer Partners LP (ETP)

Name of Company Country of Origin/ Exchange Traded Sector Stock Price
ENERGY TRANSFER PARTNERS LP US/
NYSE
Energy – Oil & Gas – Midstream – Oil & Gas Midstream USD19.02
@ 28 Jun 2018
COMPANY PROFILE Energy Transfer Partners LP is engaged in the crude oil operations consist of an integrated set of pipeline, terminalling, and acquisition and marketing of crude oil from producers to end-user markets.

Energy Transfer Partners is one of the largest diversified master limited partnerships with a strong platform of crude oil, natural gas, and natural gas liquids assets primarily in Texas and the U.S. midcontinent region. Following the 2017 merger with Sunoco and the PennTex unit purchase, ETP owns 71,000 miles of pipelines and a large network of refined product distribution. ETP also will be a part owner in the Lake Charles LNG export facility.

Stock Code ETP
Stock Valuation and Dividend Analysis Below

Energy Transfer Partners Dividend Yield

For stocks that has a history of paying meaningful dividends, the stock price is often dependent on how much dividend the company pays.
At the price of USD19.02 as at 28 Jun 2018, Energy Transfer Partners LP is trading at a Dividend Yield of 12.0%. This is a 5.2% discount to its historical average Dividend Yield of 11.4%.  (Note: The lower/higher the dividend yield, the more expensive/cheaper the stock is.)
Is the stock overvalued? One should not just look at one indicator to determine the fair value of a stock.
ProThinker believes in using a combination of valuation methods to decide whether a stock is over or undervalued? The five ratios we use are Price to Earnings, Price to Sales, Price to Cash Flow, Price to Book and Dividend Yield. We use multiple methods to value a stock because each has its benefits as well as shortcomings. Price to Earnings and Price to Cash Flow Ratios relate stock price to profitability but are meaningless when the comany has negative earnings or cash flows. Price to Sales Ratio is more stable because sales are never negative. However, this does not tell us whether the company is able to sell profitably. Price to Book Ratio gives us an indication as to how much we are paying for the company’s assets but it is not directly related to the company’s profitability. Dividend Yield cannot be used for companies that are paying little to no dividends.
While it is important to value stocks based on multiple valuation methods, this often leads to differing views on valuation. One indicator may suggest that a stock is overvalued while another suggest that it is undervalued. This does not help an investor who needs to make a definite decision whether to buy, hold or sell the stock. That is why we advocate the use of a Composite Valuation Indicator, which is derived from the best combination of the five indicators above. A Composite Valuation Indicator will give you ONE conclusion on whether a stock is under or over valued.
To find out more about our valuation methodology, click here. 
We should not only be concerned about the amount of dividends, we should determine if the dividends paid out by the company are sustainable. One way to do that is to compare dividends paid out to the cash flows that the company is generating.
The company always pays less dividends than its free cash flow, which is very good.

Energy Transfer Partners Dividend vs Free Cash Flow

Source of Data: Charts are from ProThinker Stock Report. Company description, historical financial statements data and price data are from gurufocus.com. Estimates are from gurufocus and/or 4-traders.com – Thomson Reuters.
Disclaimer: This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither ProThinker nor any other party guarantees its accuracy or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of ProThinker. Copyright(c) 2018. All rights reserved.

 

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