Kenny Polcari, chief market strategist at SlateStone Wealth, says that investors should shift their focus from technology stocks to more stable industries following the recent rate cut by the US Federal Reserve of 50 basis points.
In an interview on CNBC, Polcari referred to the reduction in rates as a crisis-level cut and encouraged investors to consider utilities, financials and consumer staples stocks that offer high dividends.
Polcari cited Energy Transfer LP, (NYSE: ET), as “the perfect stock” for the current market.
Stocks of Energy Transfer: Strong dividend appeal
Energy Transfer is a midstream energy service company based in Texas that has attracted Polcari’s attention because of its strong performance and high dividend yield.
The company’s latest quarterly revenue was $20.73 Billion, compared to analysts’ expectation of $21.5 Billion. However, the revenue increased by over 13% year-over-year.
Polcari is still bullish about the stock. Its impressive dividend yield, which stands at 7.90% makes it a great choice for investors who are looking to earn income.
Polcari said that Energy Transfer was “first-class in its field” and cited its strong dividends payouts, consistent performance as reasons for investing. Lower interest rates may also increase its appeal.
Energy Transfer is likely to be benefited by the Federal Reserve signaling an additional rate reduction of 50 basis points before 2024.
Low interest rates usually stimulate economic growth and increase energy consumption.
Reduced borrowing costs can also help Energy Transfer fund its growth plans and manage their debt better. This will improve the company’s long-term prospects.
Fixed-income options offer lower yields, so dividend stocks such as Energy Transfer could become more appealing to investors.
Wells Fargo on Energy Transfer Stock
Analysts at Wells Fargo have echoed Polcari’s optimistic outlook for Energy Transfer. They recently increased their target price to $19 from the current level, implying an 18% increase.
Energy Transfer has increased its EBITDA forecasts, reflecting better than expected growth.
The new estimate for the company’s adjusted EBITDA in fiscal 2024 is between $15 billion and $15.5 million, up from its previous estimate of 15 billion to $15.3 millions.
Wells Fargo noted Energy Transfer’s strategic acquisition of WTG Midstream for $3.25 billion in May. This further strengthened its position in energy.
Wells Fargo analyst’s say that the stock is currently trading at its highest level in five years, and with a P/E ratio of 13,69. This suggests a positive risk/reward equation.
Energy Transfer outperformed other major energy firms like Chevron and Shell in the last few months, even Warren Buffett’s favourite, Occidental Petroleum.
Bryn Talkington of Requisite capital, a managing partner, has also expressed positive sentiments regarding the stock. This reinforces its reputation in today’s marketplace as a solid investment.
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