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Stock struggles in 2025 may be presenting investors with a buying opportunity.
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The 8% dividend yield is eye-catching and, more importantly, sustainable.
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New projects could be catalysts for long-term growth.
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10 stocks we like better than Energy Transfer ›
Although the group’s results are positive, energy is one of the seven lagging sectors S&P 500 so far this year. Some stocks have been hit harder than others.
Consider the intermediate operator Energy transfer (NYSE: ET). That stock is down nearly 17% year to date as I write this, a drop that has fueled its dividend yield to approximately 8%. Combine that drop at a time of increased market strength with that astonishing performance, and it stands to reason that some investors are considering Energy Transfer as a potential performance trap. But I don’t think it is.
tthe company recently announced the tall of its onerous Lake Charles liquefied natural gas (LNG) project, potentially freeing up resources that can be allocated to the higher-potential Desert Southwest expansion plan.
The company also has stable adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) growth and strives to effectively manage leverage.
The pipeline operator’s desired net debt-to-EBITDA ratio of 4-4.5 is a priority because it aligns with peers while mitigating the risk of losing its investment grade credit rating. The dividend is further supported by expectations that Energy Transfer’s long-term finances will improve as new projects come online, potentially bolstering free cash flow (FCF) generation in the process.
Looking further, investors may not fully appreciate that Energy Transfer has some exposure to growing data center demand. The company says Desert Southwest’s expansion is based on meeting “additional customer demand” and data centers could be part of that equation.
When it comes to data centers, at least two factors are widely known. First, hyperscalers seek to obtain natural gas from basin projects before it reaches the open market. Second, some of the richest gas basins are in Texas, which is also a growing hub for data centers. Those factors are important when analyzing Entergy Transfer because the company is the largest intrastate pipeline operator in the Lone Star State, so it’s logical to assume it will benefit from data center-driven demand.
Before you buy Energy Transfer stock, consider this: