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Yielding Almost 7%, This Dividend Stock Is a Buy on Trump's Policies and AI

Yielding Almost 7%, This Dividend Stock Is a Buy on Trump's Policies and AI

Globe and Mail20-03-2025

While concerns over President Donald Trump's trade and immigration policies have pulled down broader markets, some sectors stand to benefit from them. This includes the fossil fuel and energy sector.
In the energy space, Energy Transfer (ET) is one stock that stands to benefit not only from Trump's policies, but also from the pivot toward artificial intelligence (AI). The cherry on the top is its almost 7% yield which looks quite juicy compared to its peers and broader markets. Along with the fat dividend, ET brings prospects of capital appreciation to the table, as we'll discuss in this article.
Energy Transfer's Management Has Been All Praise for Trump's Policies
While several companies have expressed apprehensions over Trump's policies, such as those in the automotive industry, Energy Transfer's management was all praise for the new administration. During the Q4 earnings call, Energy Transfer co-CEO Marshal McCrea said, 'We have a president and an administration that loves this country, that fully recognizes how blessed we are with not only fossil fuel resources but a lot of resources, a lot of resources that are needed in this renewable push.'
He discussed the administration's push for 'sensible' regulations while touting the energy export opportunity.
AI Energy Demand Could Fuel ET's Growth
Natural gas (NGJ25) demand is expected to spike as AI fuels electricity demand. Energy Transfer announced a long-term agreement with CloudBurst data centers and will provide natural gas to their data center in Texas. It was the company's first commercial deal to supply natural gas to a data center directly and it stressed that 'it will not be the last.' During the Q4 earnings call, ET said that it has received requests from 70 prospective data centers spread across 12 states. Additionally, the company said it has received inbound requests from over 60 power plants that it does not currently serve and another 15 that it is currently supplying.
The company expects to spend $5 billion on growth capex in 2025 which is significantly higher than the previous year. The majority of these projects will come online next year and their earnings will ramp up in 2026 and 2027. Energy Transfer expects its growth to stay strong through the end of this decade as the company invests to expand its portfolio.
Energy Transfer's Dividend Policy
Midstream companies are known to pay generous dividends and Energy Transfer intends to increase its distribution by between 3%-5% annually. During the Q4 earnings call, responding to an analyst question over distributions, Co-CEO Thomas Long said that the company would stick to that range even as it guided for earnings before interest tax, depreciation, and amortization (EBITDA) growth of 5% at the midpoint for 2025.
Here, it's worth noting that while the company places a great emphasis on its dividends, they are not certain. In 2020, Energy Transfer was forced to cut its distribution by half. At the time, with the pandemic greatly impacting energy demand, several companies either cut their dividends or suspended them altogether. However, ET has since raised its dividend, and the current payout is higher than what it was before the cut. The company used its cash flows to pare down some of its debt and its balance sheet is now in a much better shape.
Energy Transfer Stock Forecast
Brokerages are quite bullish on Energy Transfer, and of the 14 analysts covering ET stock, 12 rate it a 'Strong Buy,' while one says it's a 'Buy.' One analyst rates the stock a 'Hold,' and the mean target price of $23 is 21.7% higher than the March 17 closing price. ET stock trades even below the Street-low target price of $20, while its Street-high target price of $25 is 32.2% higher.
The Final Verdict: ET Looks Like a Buy
ET stock trades at a forward enterprise value-to-EBITDA multiple of 8.6x which does not look demanding considering the growth opportunity in the form of energy exports and AI. There have previously been concerns over its corporate governance and weak balance sheet, but Energy Transfer has now mostly addressed these issues.
Energy Transfer has fallen roughly 12.5% from its 2025 highs and I see the fall as a good opportunity to buy this high-dividend stock.

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