The stock of Energy Transfer (ET), and its total return, have performed well over the last few years. Investors have been chasing its high dividends while its revenue growth and profitability have remained stable.
The SPDR S&P500 (SPY), which has returned 113%, is slightly higher than this fund.
Energy Transfer and Enterprise Energy Partners are two of the most well-known Master Limited Partnerships (MLP). You should also consider The Williams Companies (WMB).
It has a longer history of outperformance than ET, and this trend is likely to continue.
Top MLP players
Williams Companies, with a market capitalization of more than $55 billion, is one of top MLP players.
It is also a mission critical infrastructure company in the United States that offers energy solutions. This is done by providing natural gas gathering and processing as well as transmission.
The company is also a key player in fractionionation – a process that separates natural gas into its constituent components. This is a crucial process which allows natural gas to be separated into different products such as methane butane and propane.
Williams, as an MLP is not very well known by retail customers. Williams is a popular brand in the energy industry, where it has over 700 clients. It has over 33,000 miles worth of pipelines.
Williams and other MLPs are cyclical in nature. Williams’ revenue increased to $11.3 billion by 2022, but then dropped to $9.9 in 2023. Its revenue for the last twelve months (TTM), was more than $10 billion.
The company’s profits have grown steadily over the last few years. The company’s net profit rose from $850m in 2019 to $3.17bn in 2023. This was due to its increased efficiency.
The management expects that the revenue growth of its company will continue to grow, thanks to the recent acquisitions of Gulf Coast Storage and DJ Basin.
Demand for gas to continue
Energy Transfer is a different company from Williams Companies in that it focuses primarily on natural gas. Energy Transfer has a more diverse portfolio, with natural gas and oil assets.
Williams Companies is now in the spotlight as natural gas prices are falling. TradingView data shows that natural gas prices have fallen by more than 40% since their peak in 2023. The company’s 10k report mentions that commodity prices are a major risk.
Price volatility could impact the amount of money we receive from our customers for the products and services that we provide, as well as the volume. Prices impact the cash flow we have available to invest in capital expenditures, and our ability borrow money or raise extra capital.”
As evidenced by recent results, its revenues increased marginally from $2.36 to $2.46 Billion, a slight increase. Its net income dropped from $460 to $401 millions.
The long-term outlook for prices is that they will bounce back due to the increasing demand for natural gases, which are 45% cleaner and cheaper than coal and more reliable than solar or wind.
The company will continue to benefit from the growing demand for US LNG from Europe. This continent has been heavily dependent on Asia. It is noteworthy that its Transaco Pipeline remains in the best US Gas export corridor
Williams stock is superior to Energy Transfer
As I’ve written here and here, I absolutely love Energy Transfer. Williams’ performance shows that I believe it is a more profitable investment at the moment.
This is mainly due to its performance over the past few years. Williams’ stock price has increased by 169% over the past five years, while Energy Transfer shares have risen by 94%.
This year, Williams’ stock price has increased by 33% and Energy Transfer by 24.5%.
Williams also has a very strong momentum. The stock, as shown in the chart below has surged to a new record high. Weekly, the stock has been above all moving averages and the Average Directional Index has reached 42. A stock’s ADX should be at least 25.
The Relative Strength Index and other oscillators are now at overbought levels. Stock is overvalued by other metrics as well. While a pullback is possible, I still expect the stock to continue performing well and beat Energy Transfer for many years.
As updates are made, the post Williams stock is a better investment than Energy Transfer Stock
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