Energy Transfer: The 7.4%-Yielding Dividend Stock Income Investors Can't Ignore
- - Energy Transfer: The 7.4%-Yielding Dividend Stock Income Investors Can't Ignore
Keith Speights, The Motley FoolJanuary 27, 2026 at 5:04 AM
0
Key Points -
Energy Transfer's solid underlying business makes its distribution dependable.
The master limited partnership has significant growth opportunities supplying natural gas to data centers.
Energy Transfer expects to grow its distribution by 3% to 5% per year over the long term.
10 stocks we like better than Energy Transfer ›
High dividend yields don't necessarily imply high risk. I think Energy Transfer LP (NYSE: ET) is an excellent case in point.
This master limited partnership (MLP) offers a distribution yield of 7.4%. And that distribution appears to be relatively safe, making Energy Transfer an ultra-high-yield dividend stock that income investors can't – or at least shouldn't – ignore.
Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now, when you join Stock Advisor. See the stocks »
A person wearing a hardhat standing next to a pipeline.
Image source: Getty Images.
A solid business
Energy Transfer's solid business makes its distribution dependable. The MLP operates more than 140,000 miles of pipeline spanning much of the U.S. Around 90% of its adjusted EBITDA comes from fees, meaning that Energy Transfer's fortunes don't hinge on commodity prices.
Roughly 40% of Energy Transfer's adjusted EBITDA is generated by operations focused on natural gas. That's a good thing, because natural gas presents tremendous growth opportunities for the company.
In particular, the booming data center market is driving higher demand for natural gas. The artificial intelligence (AI) applications hosted in these data centers require significant amounts of electricity. Natural gas is a top fuel source for powering the plants that generate this electricity.
In recent months, Energy Transfer has landed multiple data center deals. For example, the MLP signed agreements with Oracle (NYSE: ORCL) to supply natural gas to three data centers. It also inked an agreement with CloudBurst to provide natural gas to data centers in Central Texas.
Unsurprisingly, much of Energy Transfer's growth-related capital expenditures in 2026 will be in expanding its natural gas capabilities. In addition to building more pipelines, the MLP plans to double the capacity of its Bethel gas storage facility in Texas.
An attractive distribution
Energy Transfer's management expects the distribution to grow by 3% to 5% per year over the long term. This planned growth, combined with the MLP's juicy yield, should make its distribution highly attractive to income investors.
Can Energy Transfer deliver on its distribution growth objectives? I think so. The company is in the strongest financial position in its history. Leverage ratios are in the lower half of management's target range of 4.0x to 4.5x.
Notably, top executives are demonstrating their conviction in Energy Transfer's prospects by putting their money where their mouths are. The MLP's insider ownership of 10% is roughly five times greater than peers. Executive Chairman Kelcy Warren has never sold a unit of Energy Transfer and has bought around 65 million units since January 2019.
The dividend world goes beyond just Dividend Kings (a group of stocks with at least 50 consecutive years of dividend increases). To obtain higher yields, income investors must expand their horizons. Energy Transfer is the kind of stock they shouldn't overlook.
Should you buy stock in Energy Transfer right now?
Before you buy stock in Energy Transfer, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Energy Transfer wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $464,439!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,150,455!*
Now, it’s worth noting Stock Advisor’s total average return is 949% — a market-crushing outperformance compared to 195% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.
See the 10 stocks »
*Stock Advisor returns as of January 27, 2026.
Keith Speights has positions in Energy Transfer. The Motley Fool has positions in and recommends Oracle. The Motley Fool has a disclosure policy.
Source: “AOL Money”
