Income is a big part of investors' returns. Stocks, mutual funds and fixed income ideas in this column are featured because they are relatively solid in their ability to pay dividends or interest. We're giving income investors a resource to start their research for investments that give better yields with lower risk.

December 15, 2010 - Energy Transfer Partners, L.P. (ETP-NYSE) through its subsidiaries, engages in the natural gas midstream, and intrastate transportation and storage businesses in the United States. The company's midstream operations focus on the gathering, compression, treating, blending, processing, and marketing of natural gas in the Austin Chalk trend of southeast Texas, the Permian Basin of west Texas and New Mexico, the Barnett Shale in north Texas, the Bossier Sands in east Texas, and the Uinta and Piceance Basins in Utah and Colorado.

The company's interstate transportation operations transports natural gas to the California border; and delivers natural gas from the east end of its system to Texas intrastate and Midwest markets. In addition, it sells propane and propane-related products and services to residential, commercial, industrial, and agricultural customers.

The company owns and operates approximately 17,500 miles of in service natural gas gathering and intrastate transportation pipelines, 3 natural gas processing plants, 11 natural gas treating facilities, 11 natural gas conditioning facilities, and 3 natural gas storage facilities located in Texas. It also owns Heritage Propane, the third largest propane marketer, serving 1.2 million customers in 40 states. Energy Transfer Partners GP, L.P. serves as a general partner of the company. Energy Transfer Partners, L.P. was founded in 2002 and is based in Dallas, Texas.

Operating profits in 2009 were from intrastate transportation and storage (58%); gas gathering and processing (12%); interstate gas transportation (10%); propane (20%). Total revues were $5.417 billion for the year. In 2010, 9 analysts see $6.45 billion in sales, then $7.73 billion in 2011.

Earnings should double between now and next year, going from $1.31 (according to the consensus from 9 analysts) to $2.65. First quarter of next year is a good indication of the pickup analysts expect with $1.07 as the estimate compared to 74 cents in the first quarter of this year. New pipelines opening are part of the reason for increased profit forecasts.

Third quarter results showed some of the improvement. Distributable cash flow increased by 10% from the same period last year. Intrastate transport was up 19%, treating and processing was higher thanks to more shipments and new lines, and propane profits increased. Those positive developments more than compensated for lower interstate transportation profits which had higher taxes imposed on a new pipeline.

The fourth quarter is usually stellar. More heat is needed as winter starts, sometimes early as it seems to be doing this year. This year's seasonal boost will get help from the company's one-half interest in a $1 billion pipeline as it starts to book profits in early next year, profits that should grow as the year progresses. Another $1 billion pipeline, the Tiger Pipeline, should start showing revenues and profits in the first quarter and continue to increase into 2012. These new lines, and other projects, should let management increase the dividend distribution next year. The divdend, however, is more associated with cash flow than with earnings.

That distribution is attractive and has grown for the last 6 years, every year since it went public except for this year when it matched 2009's payment. It started at $1.38 in 2004 and went ever higher to $3.58 last year. This year ended with $3.58. The last dividend was paid on November 14. That suggests the next one will be in February.

More numbers: Market Cap is $9.52 billion. Trailing P/E is 35 while the Forward P/E is 18.77. Price to sales ratio is 1.59. Price to book is 2.07. Book value is $23.80. Operating margin for the last 12 months was 18.90% and the Profit margin was 10.98%. Return on equity was 14.96% and Return on assets was 6.11%. There's $80 million in cash for 42 cents a share. Total debt is $6.05 billion. Debt to equity is 1.32 times. Current ratio is 1.15. Beta is .56. There are 191.60 million shares outstanding with a Float of 140.76 million. Insiders own 26.72% of the units. Institutions have 19% of the Float.

Income investors will like the large return from ETP. If they also think the price of gas is going higher, then this stock should have appeal from a capital appreciation perspective. Just keep in mind that there could be tax consequences from the dividend and some tax expertise will be helpful in determining what, if any, those would be for each individual.

- Company Web site: www.energytransfer.com

 Ted Allrich