Summary: Energy Transfer and Enterprise Products Partners are two of the largest midstream companies in North America, with a significant portion of their business generated from the United States. While both companies have a domestic focus due to the nature of their assets, Energy Transfer has raised concerns among conservative investors due to its history of making decisions that may not align with shareholder interests. In contrast, Enterprise Products Partners has maintained a consistent track record of prioritizing unitholder value and delivering distribution increases for 26 consecutive years.
Understanding Midstream Companies
Midstream companies like Energy Transfer and Enterprise Products Partners play a crucial role in the energy sector by providing infrastructure assets such as pipelines that facilitate the transportation of oil, natural gas, and other products. These businesses charge fees for the use of their assets, which are largely determined by the volume of product moved rather than commodity prices. Given the importance of energy to the global economy, demand tends to remain relatively robust even during economic downturns.
Energy Transfer's History of Concerning Decisions
Energy Transfer has faced criticism from investors due to several decisions that may have prioritized management interests over those of shareholders. One notable instance was in 2016 when the company agreed to buy Williams but ultimately canceled the deal, citing concerns about debt and potential dividend cuts. During this process, Energy Transfer issued convertible securities, a significant portion of which went to its then-CEO. This decision has raised questions about the company's priorities and whether management is willing to protect their own interests at the expense of shareholders.
Enterprise Products Partners: A Reliable Choice
In contrast, Enterprise Products Partners has demonstrated a commitment to prioritizing unitholder value through its consistent record of delivering distribution increases. With 26 consecutive years of distribution growth, Enterprise Products Partners has established itself as a reliable choice for income investors. The company's investment-grade rated balance sheet and strong distributable cash flow coverage ratio further support its reputation as a stable and secure investment opportunity.
Comparison: Energy Transfer vs. Enterprise Products Partners
While both companies operate in the midstream sector and have significant domestic business, Energy Transfer has raised concerns among conservative investors due to its history of making decisions that may not align with shareholder interests. In contrast, Enterprise Products Partners has demonstrated a commitment to prioritizing unitholder value and delivering consistent distribution growth. Given these differences, most investors are likely better off choosing Enterprise Products Partners over Energy Transfer.
Is Energy Transfer the Right Choice for You?
Before investing in Energy Transfer, consider the following: The Motley Fool's Stock Advisor analyst team has identified top-performing stocks that have produced significant returns in the past. By joining Stock Advisor, you can gain access to this exclusive list of 10 top stocks and potentially benefit from their outperformance compared to the S&P 500.
Conclusion
Energy Transfer and Enterprise Products Partners are two distinct companies operating within the midstream sector. While both have a domestic focus due to the nature of their assets, Energy Transfer has raised concerns among conservative investors due to its history of making decisions that may not align with shareholder interests. In contrast, Enterprise Products Partners has demonstrated a commitment to prioritizing unitholder value and delivering consistent distribution growth. Most investors are likely better off choosing Enterprise Products Partners over Energy Transfer due to its stable financials, strong distributable cash flow coverage ratio, and consistent record of delivery distribution increases for 26 consecutive years.