Over the past 10 years Energy Transfer Equity LP. (NYSE:ETE) has returned an average of 6.00% per year from dividend payouts. The company currently pays out a dividend yield of 8.46% to shareholders, making it a relatively attractive dividend stock. Let’s dig deeper into whether Energy Transfer Equity should have a place in your portfolio. View our latest analysis for Energy Transfer Equity

How I analyze a dividend stock

Whenever I am looking at a potential dividend stock investment, I always check these five metrics:

• Is its annual yield among the top 25% of dividend-paying companies?

• Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?

• Has the amount of dividend per share grown over the past?

• Can it afford to pay the current rate of dividends from its earnings?

• Will it be able to continue to payout at the current rate in the future?

How well does Energy Transfer Equity fit our criteria?

The current trailing twelve-month payout ratio for ETE is 115.21%, meaning the dividend is not sufficiently covered by its earnings. In the near future, analysts are predicting a more sensible payout ratio of 52.06%, leading to a dividend yield of 10.12%. Furthermore, EPS should increase to $2.1, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment. If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. In the case of ETE it has increased its DPS from $0.41 to $1.22 in the past 10 years. It has also been paying out dividend consistently during this time, as you’d expect for a company increasing its dividend levels. This is an impressive feat, which makes ETE a true dividend rockstar. In terms of its peers, Energy Transfer Equity produces a yield of 8.46%, which is high for Oil and Gas stocks.

Next Steps:

With this in mind, I definitely rank Energy Transfer Equity as a strong dividend stock, and makes it worth further research for anyone who likes steady income generation from their portfolio. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. I’ve put together three key aspects you should further examine:

1. Future Outlook: What are well-informed industry analysts predicting for ETE’s future growth? Take a look at our free research report of analyst consensus for ETE’s outlook.

2. Valuation: What is ETE worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether ETE is currently mispriced by the market.

3. Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.

To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned.