Energy transfer (NYSE: ET) offers investors an attractive income stream. The distribution yield of the Master Limited Partnership (MLP) is approximately 8%. That is several times above S&P 500‘S 1.3% dividend yield.
Here’s a closer look at how much money the MLP will pay out to its investors this year.
Zoom in on Energy Transfer’s distribution payment
Energy Transfer pays its investors a quarterly distribution of $0.3175 per unit ($1.27 annualized). The MLP had approximately 3.4 billion common units outstanding at the end of the first quarter. That brought its total cash outlay to nearly $1.1 billion in the periodAt that rate, the MLP will be the a little less than $4.3 billion in cash to shareholders by 2024.
The total payment will probably this year will be slightly higher than that. Energy Transfer has pledged to increase distribution per unit by 3% to 5% each year, with modest increases each quarter. Moreover, the company has agreed to purchase WTG Midstream in a deal valued at nearly $3.3 billion, financed in part by the issuance of 50.8 million new common units. The combination of growing distribution per unit and an increase in the total number of units outstanding is likely to push full-year distribution levels above $4.3 billion.
Energy Transfer can easily afford to cover that level of cash distributions. It generated nearly $2.4 billion in distributable cash flow in the first quarter and should generate about $7.5 billion for the full year. That’s enough to cover distribution and fund expansion projects (about $2.9 billion) with room to spare.
A well-oiled revenue generating machine
Energy Transfer pays a very lucrative distribution to its investors. The MLP can easily cover its payout with its massive cash flow. It has enough left over to fund its growth, which gives it the fuel to increase its already massive payout. These characteristics make it an attractive option for those looking for an above-average and steadily increasing income stream.
Should you invest $1,000 in Energy Transfer now?
Before buying Energy Transfer stock, you should consider the following:
The Motley Fool Stock Advisor The team of analysts has just identified what they think is the 10 best stocks for investors to buy now… and Energy Transfer wasn’t one of them. The 10 stocks that made the cut could deliver monster returns in the years to come.
Think about when Nvidia created this list on April 15, 2005… if you had invested $1,000 at the time of our recommendation, you would have $757,001!*
Stock Advisor offers investors an easy-to-follow blueprint for success, including portfolio building guidance, regular analyst updates, and two new stock picks each month. The Stock Advisor has service more than quadrupled the performance of the S&P 500 since 2002*.
View the 10 stocks »
*Stock Advisor returns from June 24, 2024
Matt DiLallo has positions in Energy Transfer. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
How much will Energy Transfer pay out in dividends this year? was originally published by The Motley Fool
