Could Energy Transfer Stock Today Be Your Golden Ticket to Financial Freedom?
Energy Transfer stock—sleepy pipeline play or secret wealth machine? The midstream giant's 7.5% yield and dirt-cheap valuation have income hunters circling. But can this high-stakes energy bet really print generational money—or just pad a CEO's third yacht?
The Bull Case in Barrel Terms
ET's sprawling infrastructure network moves 30% of US crude. When energy flows, so do dividends—the company's racked up 30+ consecutive quarterly payouts. At today's prices, every $10k invested drips out $750/year in passive income.
The Bear Trap
Debt's the devil here. $50B+ in liabilities could squeeze payouts if rates keep climbing. And let's be real—this isn't some AI moonshot. We're talking about metal tubes in the ground trading at 8x earnings.
Bottom Line
Energy Transfer won't make you Bezos. But for yield-starved investors? That fat payout could compound into serious coin—assuming Washington doesn't outlaw fossil fuels tomorrow. Just don't bet the ranch... unless you've got a spare.
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About Energy Transfer
The first thing you should know about Energy Transfer is that it's a limited partnership (LP). One key benefit of investing in an LP is that it doesn't pay corporate income taxes. This can help investors avoid double taxation, where the company pays taxes on its profits and then pays dividends to unitholders who have to pay taxes on the dividends.
If you want to profit from increased natural gas demand driven by AI, Energy Transfer is one of the top midstream companies in North America. Its natural gas pipelines generate roughly 19% of its total adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA). Operations related to natural gas liquids (NGLs) and refined products contribute 20% of adjusted EBITDA. Midstream assets, including natural gas gathering pipelines, kick in another 20%.
Energy Transfer's pipelines transport around 32.4 million British thermal units (BTUs) of natural gas each day. The LP fractionates (separating NGLs into their components) in the ballpark of 1.15 million barrels per day of NGLs. And its facilities can store roughly 236 billion cubic feet of natural gas.
However, Energy Transfer's business isn't limited to natural gas and NGLs. The company also transports around 7 million barrels per day of crude oil. Its Sunoco subsidiary primarily focuses on energy infrastructure and the distribution of motor fuels. Its USAC subsidiary provides compression services used in processing and transporting crude oil, in addition to natural gas.
A pipeline to attractive total returns
Energy Transfer has delivered a cumulative total return of around 300% over the last five years. The LP's distributions accounted for nearly half of that amount.
Distributions should continue to play an important role in total returns for a long time to come. Energy Transfer's distribution yield (the LP version of dividend yield) currently stands at 7.59%. The company targets annual distribution growth of between 3% and 5%.
Investors will likely enjoy more than just juicy distributions, though. Energy Transfer's unit price should also appreciate nicely as its adjusted EBITDA rises. Between 2020 and 2024, the midstream leader's adjusted EBITDA increased by a compound annual growth rate of 10%. Is that level of growth sustainable? Probably so.
Energy Transfer has a significant project backlog that it believes will support long-term growth. In its second-quarter update, the company reported requests to connect to around 200 data centers in 15 states. It also had requests to connect to more than 60 power plants in 14 states.
Perhaps the biggest indicator of how AI could boost Energy Transfer's fortunes over the long run is its agreement with CloudBurst to provide natural gas to data centers in central Texas. With this deal, Energy Transfer's pipelines will provide up to 450,000 million BTUs per day of natural gas to CloudBurst's AI-focused data center campus.
Setting you up for life?
With all this in mind, can investing in Energy Transfer set you up for life? Maybe. The answer to the question hinges largely on how much money is required to achieve the goal, which will vary from one person to the next. It also depends on how much money you can invest and what your investment time frame is.
Whether or not buying Energy Transfer stock sets you up for life, it could be a profitable long-term investment. Income investors should especially find this LP attractive because of its ultrahigh distribution yield.
