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Energy Transfer Equity Has an Impressive Distribution Guidance

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Distribution per unit

Energy Transfer Equity’s (ETE) distributions gained momentum from 3Q13 after a few acquisitions and internal restructuring measures were undertaken by the partnership. For the most recent quarter, Energy Transfer Equity declared a distribution of $0.265 per unit on a post-split adjusted basis. This represents 39.47% YoY (year-over-year) and 8.16% sequential growth over 2Q14 and 1Q15, respectively.

Few MLPs have generated better YTD (year-to-date) returns compared to Energy Transfer Equity. Martin Midstream Partners (MMLP), Tallgrass Energy Partners (TEP), and Genesis Energy (GEL), saw their 2Q15 distribution rise by 2.50%0, 52.60%0, and 10.60% YoY, respectively. Together, Genesis Energy and Energy Transfer Equity account for 10.86% of the Global X MLP ETF (MLPA).

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Distribution growth guidance

Energy Transfer Equity hasn’t given a distribution growth guidance for the rest of 2015. However, Wall Street analysts have estimated its distributions for 3Q15 and 4Q15 to be $0.283 and $0.308, respectively. This should bring the total distribution per unit to $1.101 for full-year 2015. This represents a 37.30% YoY rise for fiscal 2015 compared to fiscal 2014. Energy Transfer Equity is expected to benefit from:

  • Regency Energy Partners’ merger that was completed during 2Q15
  • Energy Transfer Partners and Sunoco Logistics’ (SXL) fee-based organic projects that came online during 1H15 or are expected to come online in the rest of 2015.

These benefits are expected to be partially offset by the IDRs (Incentive Distribution Rights) subsidies that Energy Transfer Equity has given to its subsidiaries in relation to the recent transactions like the ETP-Regency merger and the Sunoco GP (general partner) and IDR exchange.

Distribution yield

Energy Transfer Equity has a current distribution yield of 3.92%. The partnership’s impressive distribution growth guidance, stable cash flows, and strong coverage are likely the reasons for its relatively low distribution yield.

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