This 9.5% Yield Is Safer Than Most Investors Think

This LP currently offers a 9.5% distribution yield. It has reported a distribution coverage ratio of 2.0 but this metric has proved unreliable in many cases. Investors should focus on the free cash flows. While the free cash flows have been poor in 9 of the last 10 years, they are improving at a fast clip thanks to the upcoming end of the multi-year investment program.

Energy Transfer (ET) is a master limited partnership [MLP] that currently offers a 9.5% DISTRIBUTION YIELD. When a stock offers such an extraordinary yield, the market usually indicates that the distribution is at the risk of being cut. Therefore, investors should perform their due diligence before purchasing high-yielding stocks. Otherwise, they run the risk of incurring excessive losses. While my experience has shown that most high-yielding MLPs eventually cut their distributions, in this article I will discuss why the distribution of Energy Transfer is safer than most investors think.

Source: Seeking Alpha

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