Could Buying High-Yield Energy Transfer Stock Today Set You Up for Life?

Published: Tuesday, September 9, 2025 at 9:04 am

Energy Transfer: A High-Yield Investment with a Complex Past

Energy Transfer (ET), a midstream master limited partnership (MLP), is attracting attention with its 7.5% distribution yield. This article examines whether this investment could provide a lifetime of income, considering both its potential and its historical challenges.

Energy Transfer operates in the stable midstream segment of the energy sector, connecting energy production to refining and the broader market. Its infrastructure assets, including pipelines, storage, and processing facilities, generate revenue primarily through fees, making its financial results less sensitive to commodity price fluctuations. The company is a major player in North America, with a market capitalization of nearly $60 billion and diversified operations across natural gas, oil, and refined products. Energy Transfer is also the general partner for two other public MLPs, though this represents a smaller portion of its earnings. The company is actively expanding its operations, with a $5 billion capital investment program planned for 2025.

MLPs like Energy Transfer offer tax advantages, passing income to unitholders in a tax-advantaged manner. However, they are not ideal for tax-advantaged retirement accounts and require unitholders to manage a special tax form, the K-1.

Despite its current financial stability and growth plans, Energy Transfer has a history of volatility. In 2020, during the coronavirus pandemic, the company cut its distribution by 50%. In 2016, it attempted a merger that was later abandoned, raising concerns about the board's priorities. While the current distribution appears secure, covered by a significant margin, these past events warrant caution.

BNN's Perspective:

Energy Transfer presents a compelling yield, but investors should carefully weigh the potential rewards against the company's history of distribution cuts and complex financial maneuvers. While the current business model appears sound, the past actions of the company's leadership should give investors pause. A more conservative approach might favor investments with a more consistent track record, even if the yield is slightly lower.

Keywords: Energy Transfer, ET, MLP, high-yield, investment, distribution yield, midstream, energy sector, pipelines, infrastructure, income, tax-advantaged, K-1, EBITDA, capital investment, dividend cut, Enterprise Products Partners, EPD

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