Are important to take the long term into account when investing. You should thinkin terms of years and decades, not months and days. However, it is also wise to keep an eye on the calendar before investing, to get ahead of a potential catalyst.
Those interested in buying midstream giant Energy transfer(NYSE:ET) should circle November 6 in their calendars. It is an important date for the master limited partnership (MLP) because it precedes the company’s next earnings report and distribution payment. This is why investors would want to buy before that date.
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Energy Transfer will release its third quarter results after the market closes on November 6. The midstream giant is likely to report strong results.
The company has had an excellent second quarter. The adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) rose 20% to $3.8 billion, while distributable cash flow rose 32% to $2 billion. The MLP delivered record volumes across segments, fueled by strong market conditions and recently completed expansion projects, and acquisitions.
That strong momentum likely continued into the third quarter. Energy Transfer should continue to benefit from its landmark merger with Crestwood Equity Partners, which closed last November. Additionally, the company should continue to get a boost from recently completed expansion projects, including two new ones that came online in July, which should impact third-quarter results. And the company completed its highly profitable $3.1 billion acquisition of WTG Midstream in July.
Meanwhile, the company is likely to provide an update on its progress in securing additional expansion projects. For example, it lasted another step toward final approval of the long-delayed Lake Charles LNG project last month. Securing additional expansion projects would further improve growth prospects.
The number of energy transfer units has already increased by approximately 20% this year. Reporting stronger-than-expected third-quarter results or progress in securing additional expansion projects could give the company more fuel to continue its recovery. Therefore, investors can get a better price if they buy before Energy Transfer reports earnings.
Energy Transfer recently announced its final distribution payment of $0.3225 per unit. That’s an increase of $0.0025 per unit from last quarter and a wage increase of 3.2% compared to year-ago levels. That’s in line with the MLP’s plan to increase distribution by 3% to 5% annually.
The midstream company will pay its distribution on November 19. However, you must be a unit holder before the close of business on November 8 to receive the next benefit payment.
That upcoming distribution payment is another reason for investors might want that consider purchasing Energy Transfer sooner rather than later. If you purchase after November 8, you may pay a higher price for the MLP’s units and not receive your first distribution payment for another 90 days.
While there are compelling reasons to buy Energy Transfer before the market closes on November 6, there are plenty of reasons why investors might want to be more patient.
Even if Energy Transfer’s units rise after earnings are reported, investors likely will still guaranteeing a very lucrative return that is currently approaching 8%. That is much higher than the current dividend yield on the S&P500(SNPINDEX: ^GSPC)which is less than 1.5%, reflecting the MLP’s lowest valuation. In the meantime, as mentioned, the company plans to further expand its distribution in the futurewhich indicates that there will still be sufficient income.
Another reason why some investors power wants to wait to take the time to understand the ins and outs of investing in an MLP, which is different from traditional businesses. A big one is that they give their investors a Schedule K-1 federal tax form every year, which can complicate and increase the cost of filing your taxes. However, these tax complications can prevent investment in MLPs Good worth it, given their other tax benefits.
There are a few compelling reasons to buy Energy Transfer before November 6. It reports that day’s earnings, while investors must own units by the 8th in order to collect the next distribution payment. So, if If you want to make sure you own units before a potential price spike occurs and you want to receive the upcoming distribution, you need to buy them quickly.
That said, don’t the feeling that you need that hurry and buy units if you have yet to complete your research as it is trading at a low valuation and has many more distribution payments pending. It’s better to make a fully informed investment decision than to buy a stock before you know what you’re getting into.
Consider the following before purchasing shares in Energy Transfer:
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Matt DiLallo holds positions in Energy Transfer. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
Here’s Why Energy Transfer Stock is a Buy Before November 6 was originally published by The Motley Fool
