Energy Transfer (ET) reports third-quarter earnings this week on Tuesday, after a strong run that has lifted its unit price nearly 27% this year. In Q2, adjusted EBITDA rose 31% to nearly $5.1 billion and distributable cash flow rose 32% to $2.6 billion, and the company raised its full-year adjusted EBITDA outlook for the second time this year, to $18.8 billion to $19.1 billion. Growth projects include the $2.7 billion Hugh Brinson Pipeline in Texas for data center and AI demand, an expansion of the Transwestern Pipeline of up to $5.6 billion, NGL export expansion, and the $2.6 billion Vaquero Midstream acquisition. Risks include growth capital spending now planned at $5.6 billion to $5.9 billion, up from an initial $5 billion to $5.5 billion, along with construction and volume risks. The 6.5%-yielding pipeline partnership has posted 20 consecutive quarterly distribution increases and expects to grow its payout by 3% to 5% each year.
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Energy Transfer LP (ET) is a midstream energy company that moves, stores and processes oil and gas, with about 140,000 miles of pipeline and related infrastructure across 44 states. A $1,000 investment would have grown to $1,676 over three years, $2,494 over five years, $1,870 over 10 years and $3,843 over 15 years. The company is growing partly through acquisitions, recently agreeing to buy Vaquero Midstream for about $2.6 billion, and its fee-based contracts can provide reliable cash flow for about the next decade. Its dividend yield was recently 7%; it cut its payout in 2020 to restructure but has raised it for nearly 20 quarters in a row. As a master limited partnership, Energy Transfer requires owners to file a K-1 tax form.
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The article recommends three midstream pipeline stocks with high yields: Enterprise Products Partners (forward distribution yield of 6.3%, 1.9x coverage, and 28 consecutive years of distribution increases), Energy Transfer (6.8% yield, 2.28x DCF coverage in the first half of 2026, and its 19th consecutive quarterly increase), and MPLX (roughly 7.5% yield, 1.3x coverage, and 12.5% distribution increases in both 2024 and 2025). It links their outlook to natural gas demand from AI data centers. As an illustration, the article says a $10,000 investment in each of the three would generate around $2,068 in annual income. It argues the companies do not need elevated oil prices or unchanged Federal Reserve rates to keep paying, as long as natural gas and other fuels keep flowing through their pipelines.
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