Energy Transfer Slices its Distribution in Half
Energy Transfer's (NYSE: ET) distribution is the latest victim of this year's downturn in the energy market. The master limited partnership (MLP) cut its quarterly payout in half (from $0.305 per unit to $0.1525 per unit) in response to the turbulence and uncertain market conditions. The distribution reduction will free up cash flow that the company can allocate toward other initiatives, including repaying debt.
While Energy Transfer had repeatedly said that it didn't need to reduce its distribution, the market had priced one in given its recent yield of nearly 20%. That's because its leverage ratio remains well above its targeted level, causing some concern about its financial profile and ability to maintain an investment-grade credit rating. While the company had hoped to reduce debt over time by completing expansion projects and generating free cash flow, this year's downturn in the oil market threw a wrench in those plans. Its earnings have come in below expectations due to lower volumes and commodity prices.
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Source Fool.com
