If you are an income-focused investor, you will be attracted to Energy transfer‘s (NYSE: ET) high distribution yield of 7.3%. Add in a plan for 3% to 5% annual distribution growth and you get about 10%, which is the return most investors expect from stocks over time. Here are a few more reasons to be attracted to Energy Transfer and one that may still keep you away.
Energy Transfer’s core story is that it operates a large midstream business in North America. It basically helps move oil and natural gas around the world. The master limited partnership (MLP) uses a toll-taking approach, charging fees for the use of its energy infrastructure assets.
Where to invest $1,000 right now? Our team of analysts has just revealed what they believe are the 10 best stocks to buy right now, by joining Stock Advisor. See the actions »
This generally leads to reliable cash flows throughout the entire energy cycle. The volume of energy moving through your system is more important than oil and natural gas prices. Given the importance of energy to modern society, volumes tend to be quite high most of the time. Through the first nine months of 2025, Energy Transfer’s distributable cash flow covered its distribution at a very strong 1.8x.
Looking ahead, Energy Transfer has $5 billion in capital spending plans by 2026 to continue growing its business. Looking further ahead, management has pipelines stretching through 2029. That’s what supports its plan for 3% to 5% annual distribution growth.
There is one small detail that may concern more conservative income investors. Energy Transfer cut its distribution by 50% in 2020 during the energy crisis that accompanied the coronavirus pandemic. Management explained that the goal of the cut was to strengthen the balance sheet. That’s a good thing, of course. However, if he had counted on those distributions to cover living expenses, he would have been very unhappy and could have sold the MLP.
To be fair, leverage has reduced and the distribution is growing again. In fact, it is higher than before the cut. Still, the decision to reduce the distribution can weigh heavily on investors who need their income to pay living expenses.
There are good reasons to like Energy Transfer and there is good reason to look elsewhere. In fact, the midstream sector is full of high-performing companies and some, such as Enterprise Product Partners and EnbridgeThey have decades of dividend growth under their belts. You may have to accept lower returns, but the trade-off may be what allows you to sleep well at night during the next energy crisis.