Should You Buy Energy Transfer (ET) Stock Before Aug. 6? Here's What History Says.

Key Points

• There is no direct correlation between an earnings beat or miss and Energy Transfer's immediate stock performance.

• Energy Transfer provides a dividend yield of over 7%

• Energy Transfer's next ex-dividend date is Aug. 8.

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Energy Transfer (NYSE: ET) is a midstream energy company that transports energy commodities, including natural gas and crude oil, across North America. It operates as a master limited partnership (MLP), meaning it doesn't pay corporate income tax and passes on most of its earnings to its investors in the form of quarterly cash distributions.

On Aug. 6, Energy Transfer is set to report its fiscal second-quarter earnings. In its last eight quarters, Energy Transfer has beaten earnings-per-share (EPS) estimates three times, missed estimates four times, and hit the mark once.

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Whether Energy Transfer beats, misses, or meets its EPS estimates remains to be seen, but if you're looking to buy the stock before Aug. 6, it should be for a reason other than its potential earnings.

There isn't much correlation between Energy Transfer's earnings and immediate stock price moves

In an ideal world, a company beating earnings expectations would mean its stock price rises, and vice versa. Unfortunately, the stock market doesn't operate on that logic, because earnings alone aren't what attract or turn investors away from a stock. It's important, but not the only thing.

In Energy Transfer's case, there hasn't been much correlation between its earnings beats and misses and the near-term stock price movements. Here are its next-day stock price moves post-earnings:

Data sources: AlphaQuery and YCharts.

You should avoid trying to time the market in general, but especially in situations that lack correlation, as is the case with Energy Transfer. The focus should be on trusting the long-term returns.

Why you should buy Energy Transfer's stock before Aug. 6

The main appeal of Energy Transfer's stock is its cash distribution. Its current yield is around 7.2%, which is less than its three-year average, but significantly higher than the S&P 500's 1.25% average.

The reason you should buy Energy Transfer's stock before Aug. 6 is that its ex-dividend date -- the cutoff date to be eligible to receive a stock's next dividend payout -- is Aug. 8. By investing before then, you can ensure you receive the $0.33 cash distribution that's scheduled to be paid out on Aug. 19.

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Stefon Walters has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.