Energy Transfer(NYSE: ET) It is one of the largest owners of energy infrastructure in North America. The fees it charges customers for transporting oil and gas around the world are a reliable basis for the master limited partnership’s high 7.5% return. Still, the biggest issue more conservative income investors may face with Energy Transfer is trust. Here’s what you need to know.
Energy Transfer is a bit more complex than other pipeline-focused ones MLPs. Not only does it operate its own collection of midstream assets, it also manages two publicly traded MLPs. Sunoco LP(NYSE: SUN) And US Compression Partners(NYSE: USAC). It charges a fee to do this, but some may view this obligation as a potential distraction since fees make up only 15% of adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA).
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During the first nine months of 2025, Enerji Transfer’s distributable cash flow covered the distribution at a very comfortable rate of 1.8 times. MLP’s leverage, although higher than some of its rivals, is not a concern as its financial debt to EBITDA ratio is roughly 4.2.
Looking ahead, Energy Transfer has $5.5 billion worth of capital investment projects on its books for 2026 alone. Management believes it will support distribution growth of 3% to 5% for the year. This range is the long-term goal as Energy Transfer becomes a more reliable income investment. There are very good reasons why you might want to buy Energy Transfer, which is trading for under $20 per unit.
The future is not a big issue when it comes to investing in Energy Transfer; is in the past. More conservative dividend investors have to confront the events that occurred during the last two major crises in the energy sector.
In 2020, Energy Transfer cut its distribution in half when the global response to the coronavirus pandemic sent U.S. oil prices below zero. The goal of deleveraging was a noble one, but if you had purchased the MLP hoping for a reliable income stream you would have been sorely disappointed. Distribution is growing again and is above where it was before the outage, but a glass-half-empty perspective on this decision may keep you on the sidelines.
During the energy crisis of 2016, Energy Transfer decided to purchase a competitor. Williams Companies(NYSE: WMB)but my feet were cold. Energy Transfer warned that completing the deal could require a dividend cut, excessive leverage or both. As part of its effort to undo the deal it initiated, Energy Transfer issued convertible securities, with its then-CEO purchasing a significant amount of the issue. Although the deal was eventually canceled, it appears to have protected owners of convertibles from the risk of Energy Transfer dividend cuts. The downside of the convertible is that it will protect insiders at the expense of shareholders.
If these two corporate decisions make you wonder whether having Energy Transfer will keep you awake at night, you should probably avoid it. It’s important to trust that management has your back when investing. And the truth is, there are other options in the midstream space that don’t have similar question marks in their track record. There might be some good alternatives Enterprise Product Partners(NYSE:EPD) And bridging(NYSE:ENB)Both have decades of annual dividend increases under their belts. With Enterprise’s 6.6% yield and Enbridge’s 5.8% yield, you’ll have to give up some yield. However, more conservative income investors will likely find this trade-off worthwhile.
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Reuben Gregg Brewing Company They have positions at Enbridge. The Motley Fool has positions in and recommends Enbridge. The Motley Fool recommends Enterprise Products Partners. The Motley Fool has a feature disclosure policy.
