Latest news with #EnergyTransfer
Yahoo
9 hours ago
- Business
- Yahoo
Energy Transfer Playing The Long Game While Everyone Else Panics
Energy Transfer (NYSE:ET)'s share price was under pressure from the broader market since early 2025. This is one of those stocks that doesn't make headlines like the flashy tech companies, but is quietly building something huge while most investors are looking for the next AI company. In this article I'll analyze ET in light of recent developments and give my investment decision. Pipeline Empire Getting Bigger Warning! GuruFocus has detected 8 Warning Signs with ET. ET has one of the biggest networks in America when it comes to energy. I'm talking about over 125,000 miles of pipeline that crosses more than 30 states. That shows that ET is a company that is essentially the American energy's circulatory system. The first thing I want to touch on is how their volumes are growing overall. Interstate natural gas volumes are increased by 3% in Q1 2025 and reached a new partnership record, while crude oil shipments are up 10%, NGL shipments are up 4% and NGL exports are up 5%. Those are some really big numbers and we can clearly see the huge amount of energy that's flowing through their system every day. Before starting the year ET announced that they made an investment decision for the Hugh Brinson Pipeline which is a $2.7 billion project. That project links the Dallas/Fort Worth area to the Permian Basin. They say that the first phase will be able to handle 1.5 billion cubic feet of water every day and will be fully operational by the end of 2026. There's Also An AI Effect These days any company I analyze has AI related to it. ET is no different. They said they will make their first business contract to send natural gas straight to a data center. They worked out an agreement with CloudBurst Data Centers to develop a building just for AI. The facility will produce roughly 1.2 gigawatts of power which is enough for 750,000 homes. Co-CEO Tom Long said ET got requests for potential connections from 62 power plants it doesn't currently serve in 13 states and 15 power plants it currently serves. It also received requests from more than 70 potential data centers in 12 states. Companies are lining up to connect to ET's network in order to meet the massive power requirements of AI. LNG Export Opportunity The Lake Charles LNG export project by ET is going forward now that it received permission from the government to export 2.33 billion cubic feet of natural gas every single day. Facility will have a liquefaction capacity (this means maximum amount of liquefied natural gas (LNG) that the facility can produce) of 16.45 million tons yearly and will be operational by December 2028. In April 2025, ET also signed a development deal with MidOcean Energy. We really need to discuss about that essential matter. Because MidOcean promised to pay for 30% of the building costs. ET definitely benefit from increasing global LNG demand. As Europe continues to reduce its reliance on Russian gas and Asian markets expand ET has very good opportunity to take advantage of that. Debt Management Energy Transfer's long-term debt is $59 billion in Q1 2025. This was 14% greater than the year before. That might sound scary, but the company produces a lot of money and uses it to grow instead of merely paying off debt. The debt/equity ratio is also 130%, which is very bad for a regular corporation. But I can say that it's a fair sum for a midstream company that requires a lot of cash. For example if you look at peers of ET you'll see that average debt to equity ratio is around %157. That's why I can say that %130 is pretty okay ratio for ET. Dividend Analysis I clearly see that ET was distributing dividends since its IPO but it doesn't have a stable dividend growth. Even though the average dividend growth is around 8.29%, it saw a maximum of 42% and a minimum of -42% YoY dividend change. When I consider that dividend growth will grow by 6% on average in the coming years with a linear regression calculation I think we will encounter a DPS of $1.79 in 2030. This indicates a yield on cost of 10.14% which I think is not bad at all. When I look at the dividend yield, I again see serious volatility rather than stability. I calculate that the dividend yield fluctuates around 11.76% on average. In addition to that the linear regression calculation indicates a dividend yield of 8.26% in 2030. In the scenario where the dividend per share is $1.79, a dividend yield between 8.26 - 11.76% indicates that the stock price will be between $15.2 - 21.7 in 2030. If I calculate dividend growth with CAGR instead of linear regression, I reach a slightly different result. The dividend growth rate over the last five years is 16.48%. If I assume that this growth rate will continue for the next five years, I predict that the dividend per share will be $2.80 in 2030. This again indicates a share price in the range of approximately $23.8 - 34 with the same dividend yield level. The dividend analysis indicates a worst-case dividend of $1.79 per share and a share price of $15 in 2030, while the best-case dividend of $2.80 per share and a share price of $34. Since this range is mostly above ET's current share price, I can say that the dividend analysis is giving a bullish signal for the stock. Revenue Growth Seems Steady When I look at ET's revenue, especially since the beginning of 2023, I don't see any particular trend, neither positive nor negative. The revenue, which was stable at $20 billion, continues to keep net income around $1.2 billion. Net margin was fluctuating quite steadily around 5.24% since 2021. If I assume that revenue will shrink by an average of 3.9% in the next quarter, as it has in every second quarter since 2022, I can expect a revenue of $20.21 billion. This revenue indicates that net profit will be announced at $1.06 billion with an average net margin of 5.24%. With the current shares outstanding, this also indicates an EPS of $0.31. I see analyst consensus of $24 billion for revenue and $0.31 for EPS. But my calculations suggest that this is below expectations and almost the same EPS. This isn't surprising given ET consistently reported less income than expected. It looks like it might do it again. In conclusion, I can say that I see stability in the financials in general. Even if there are below expectations reports the stability continues and there is no negative trend in sight. Valuations and Profitability ET currently stands at 11.86x forward P/E, above its historical average of 8.63x. At the same time, while it historically diverged negatively from the SP500 index's forward P/E by an average of 11.60x, this divergence is currently at -10.26x. So it can't be easily said that the stock is a cheap stock according to forward P/E analysis, but it doesn't appear to be seriously expensive either. Compared to Kinder Morgan (KMI), ET offers a higher dividend yield (7.43% vs. 4.17%) but more leverage. ET's 14.77% ROE beats KMI's 8.43%, while its forward P/E ratio of 11.86 is lower than Kinder Morgan's 22.07. ET's more aggressive growth strategy and higher leverage create more risk but also more upside potential compared to the more conservative KMI. Price Performance and Charting ET made serious lows in 2020 and 2021 due to COVID. But it recovered very well from these levels and especially in 2022 it rose above the Hodrick-Prescott filter that I use to determine the trend. After this process, the trend officially became bullish and ET ran to $20, testing these levels again for the first time since 2017. Even though it fell below $15 in early 2025, affected by the general market trend and international relations, it managed to recover again by finding support from this HP filter. Even though the stability of its financials supported ET's recovery very well, unfortunately there is not enough positive momentum. Especially the MACD shows that negative momentum is currently taking over the stock on the monthly time frame. When I go down to the weekly timeframe, I see that especially the 100 and 200-week weighted moving averages were in a bullish trend since mid-2022. But especially with the effects of the general market sell-off in the first half of 2025, the 200-week moving average seems to have been tested for the first time since 2020. It seems likely that ET, which couldn't find enough buying, will encounter a new negative momentum when looking at the MACD. This shows that ET will retreat to at least around $16. My thought here is that the financials and its position in the general market will help and support ET's price to remain at a certain level. Even though I don't think this uptrend will be easily broken, if it drops below $16 we can see ET fall to $13. Because $13 level is a support level. I still see the worst-case scenario as one where ET fluctuates between $20-13. In the positive scenario where it stays above the moving averages, I think the bullish trend will continue as long as the $20 level is broken. Risks Especially in the financials I see that ET is having difficulty fully translating its revenue growth into net profit growth. ET's PEG ratio of 0.91 may be pricing in overly optimistic growth assumptions that could disappoint the market. In addition to that I said that the company has a fee-based revenue model, but still 10% of it is inevitably exposed to volatile commodity prices. The fact that wars are currently on the agenda in the international arena increases the volatility of oil prices, which in one way or another creates potential threats or advantages to ET's production volumes. I think this issue should be monitored carefully. Finally, the fact that the volatility and instability in dividend growth are seriously high reduces confidence for dividend investors, while volume cuts may cause a dividend decrease of 42% as in 2020. ESG and Environmental Issues ET is working on emissions reduction initiatives, including its Dual Drive compression technology, which saved 789,908 tons of CO2 by 2023. They also invested in renewable energy projects and renewable natural gas initiatives, such as the Maplewood 2 Solar Project and the Eiffel Solar Project. But the company faces ongoing environmental scrutiny due to projects such as the Dakota Access Pipeline and traditional fossil fuel focuses. ESG-focused investors may continue to steer clear of the stock despite operational improvements. Bottom Line Energy Transfer is essentially a pick-and-shovel game for America's energy infrastructure. While everyone else is arguing about renewables vs. fossil fuels, ET is building the pipelines and processing facilities that transport energy across the country, regardless of source. The AI ??and data center boom are creating a huge new demand for reliable power and Energy Transfer's network is positioned to take advantage of it. The stock is unattractive, but it pays a 7.4% dividend that is well-covered by cash flow, trades at reasonable valuations and invests in projects that should drive growth in the coming years. Its debt load is manageable given its cash generation and recent acquisitions are already showing in volume numbers. The biggest risk is probably a major recession that crushes energy demand, but even then, Energy Transfer's diversified network and core infrastructure role provide some defensive features. The only negative is that in the short term, the technical data from the charting analysis is biased toward momentum, which could put ET's stock price in a somewhat sideways trend. This isn't a get rich quick story, but it is a solid dividend-paying infrastructure company that should compound returns over time as America's energy consumption continues to grow. I think it's a good long-term investment and I'm a long-term buy, although the chart shows some downside potential down to $16. This article first appeared on GuruFocus. Sign in to access your portfolio
Globe and Mail
14 hours ago
- Business
- Globe and Mail
3 Reasons I'm Excited About Energy Transfer Stock in 2025
Key Points Energy Transfer pays a lucrative distribution backed by a strong financial profile. The MLP has visible growth coming down the pipeline. It trades at a low valuation compared with its peer group. 10 stocks we like better than Energy Transfer › Energy Transfer (NYSE: ET) is one of my largest income investments. I'm pleased to have a higher allocation to the master limited partnership (MLP) because of all it offers investors like me. Here are three reasons I'm excited to hold the midstream giant this year. A lucrative and growing income stream My main reason for owning Energy Transfer is its lucrative distribution. With my low cost basis, I earn a yield of more than 10% on this MLP, compared with its current yield of more than 7%. That high-yielding payout is on a very sustainable foundation. The MLP produces very stable cash flow as long-term, fee-based contracts and government-regulated rate structures provide about 90% of its annual earnings. Meanwhile, it distributes a conservative portion of its cash flow to investors. The midstream giant generated $2.3 billion of distributable cash flow during the first quarter, easily covering the $1.1 billion of cash it distributed to investors. That excess free cash flow allows Energy Transfer to invest in its expansion while maintaining a strong financial profile. Its leverage ratio is in the lower half of its 4.0-to-4.5 target range, putting the company in the strongest financial position in its history. This strong financial position also allows it to raise its distribution. Energy Transfer aims to increase its payment every quarter, targeting 3% to 5% annual growth. It has raised its distribution by more than 3% in the past year. A growth acceleration ahead Energy Transfer has ample fuel to continue increasing its high-yield payout. The MLP plans to invest $5 billion in organic expansion projects this year, including the construction of gas processing plants, a new large-scale gas pipeline, and additional export capacity. These projects should add to its cash flow as they launch over the next two years, accelerating earnings growth beyond the 5% expected this year. The MLP also has more expansions planned. For example, it's developing a large LNG export terminal and a pipeline for an AI data center. Catalysts such as growing Permian output, U.S. gas demand, and the growing global need for U.S. natural gas liquids should help fuel its continued expansion. Energy Transfer also boosts its growth rate with strategic acquisitions. While it hasn't announced a deal this year, its affiliate, Sunoco LP, is buying Parkland in a $9.1 billion deal, which will provide Energy Transfer with incremental income. Meanwhile, the company's strong financial profile gives it the flexibility to continue its strategy of consolidating the midstream sector. A low valuation Financially strong companies with visible earnings growth usually trade at a premium valuation. However, that's not the case with Energy Transfer. The MLP currently trades at about 9 times its enterprise value (EV) to EBITDA (earnings before interest, taxes, depreciation, and amortization). That's the second lowest valuation multiple in its peer group and well below the average of around 12 times EV/EBITDA. The MLP's low valuation drives its high distribution yield. It also provides investors with the potential for a higher return through valuation expansion. Income, growth, and value-driven upside potential There are many reasons to be excited about Energy Transfer. The MLP pays a strong, growing distribution supported by its best-ever financial profile. It also has visible growth ahead. To top it off, it trades at a bargain price. These factors could fuel strong total returns in 2025 and beyond, driving my excitement to continue holding the MLP. Should you invest $1,000 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 $636,628!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $1,063,471!* Now, it's worth noting Stock Advisor's total average return is 1,041% — a market-crushing outperformance compared to 183% for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of July 28, 2025
Yahoo
2 days ago
- Business
- Yahoo
3 High-Yield Energy Stocks That Can Survive in Today's Fast-Changing Energy Landscape
Key Points Chevron just scored a big win, highlighting the strength of the energy giant's business model. Energy Transfer is a solid stock to buy now and hold for the long term. ExxonMobil built its business to thrive in all market conditions. 10 stocks we like better than Chevron › The energy market changes rapidly. Crude prices initially rallied into the $80s to start this year. However, oil soon reversed course, plunging into the $60s on tariff-driven concerns. While oil prices bounced off that bottom, it's anyone's guess where crude prices will go next. Given how quickly things can change in the energy market, many companies have taken steps to ensure they can survive the industry's ups and downs. Chevron (NYSE: CVX), Energy Transfer (NYSE: ET), and ExxonMobil (NYSE: XOM) stand out to a few contributing analysts for their ability to handle whatever the market throws their way. That makes them ideal options for those seeking attractive and durable dividend income. Chevron is built to survive anything that comes its way (Chevron): There's one feature that investors shouldn't overlook about Chevron: its balance sheet. With a debt-to-equity ratio of around 0.2 times at the end of the second quarter, it has one of the strongest financial positions among its integrated energy peer group. Most of the time, investors pay more attention to oil prices and geopolitical events than to balance sheets. But Chevron's ability to survive whatever comes its way is partly tied to its financial strength. For example, Chevron just completed the acquisition of Hess for roughly $53 billion. Inking a deal of that scale requires both size and financial strength. But here's the interesting thing: The deal was agreed upon back in October 2023! The transaction was bogged down in the courts because of Hess' relationship with Chevron's peers. Few companies could have afforded to stick around, regardless of how attractive the deal was, for as long as Chevron did. And the energy giant's balance sheet strength was a key factor in its resilience to the headwinds the deal faced. But that's not the only place where a strong balance sheet has been a huge benefit. Oil prices are highly volatile, leading to material swings on the top and bottom lines for a company like Chevron. And yet, Chevron has managed to increase its dividend annually for 38 consecutive years. How? It has the balance sheet capacity to add debt during the hard times so it can muddle through until the good times return (at which point it reduces leverage again). With an attractive 4.7% dividend yield, even conservative investors should appreciate Chevron's ability to weather all the storms that have come its way for 38 years and counting. A promising high-yield stock with big plans Neha Chamaria (Energy Transfer): These are challenging times to be an investor in the energy sector. Oil prices are volatile, and the global energy landscape is changing in favor of cleaner energy sources. Unlike crude oil and coal, however, the demand for natural gas is projected to rise steadily in the coming decades, driven by growing demand for electricity, among other things. Given the dynamics, a stock like Energy Transfer not only can survive in today's changing landscape but also thrive in the long term. That's because Energy Transfer is a massive natural gas player that generates steady cash flows and pays big dividends. Energy Transfer operates over 130,000 miles of pipeline. Over 50% of its projected growth capital expenditures of $5 billion for 2025 will be spent on natural gas pipelines and natural gas liquids capacity expansions. It's also constructing eight natural-gas-fired power-generation plants to support its operations in Texas. The company recently bagged its first commercial deal to supply natural gas to Texas data centers. Energy Transfer, therefore, has strong growth catalysts and the financial fortitude to back its growth plans. The company also pays a steady dividend and is targeting 3% to 5% annual dividend growth in the long term. When combined with a high yield of 7.4%, Energy Transfer stock makes for a compelling buy case today. Built to thrive in any energy market Matt DiLallo (ExxonMobil): ExxonMobil built its business not to survive but to thrive in the rapidly changing energy market. The energy giant has an unmatched global portfolio of low-cost upstream oil and gas production assets complemented by a leading products solutions business (refining, chemicals, and specialty products). Exxon is also building a growing low-carbon solutions business. These businesses are delivering strong and growing earnings even in the face of continued commodity price volatility. For example, last year was Exxon's third-most profitable year in the past decade, despite commodity prices hovering toward the low end of their historical range for the most part. The company's growing scale gives it a significant competitive advantage, enabling it to leverage its size and reduce costs. Since 2019, ExxonMobil has achieved $12.1 billion in annual cost savings, and it projects total annual cost savings to reach $18 billion by 2030. Those continued cost savings will put it in an even stronger position to weather changes in the oil market. Exxon also boasts one of the strongest balance sheets in the energy sector. This gives it the flexibility to borrow money during periods of lower oil prices, allowing it to continue funding its growth. It repays that debt when commodity prices improve. The oil giant's combination of low costs, scale, and balance sheet strength puts its dividend (which yields over 3.5%) on a very sustainable foundation. The oil giant has increased its payout for 42 consecutive years, a feat achieved by only 4% of companies in the S&P 500. Exxon expects to achieve $20 billion in earnings growth and $30 billion in cash flow growth by 2030. These targets represent compound annual growth rates of 8% for earnings and 10% for cash flow, based on an average oil price of $65 per barrel, which is below current market levels. This should provide the oil giant with ample fuel to continue increasing its high-yielding dividend. This combination of financial strength and visible growth puts ExxonMobil in an excellent position to excel in today's shifting energy market. Should you buy stock in Chevron right now? Before you buy stock in Chevron, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Chevron 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 $636,628!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $1,063,471!* Now, it's worth noting Stock Advisor's total average return is 1,041% — a market-crushing outperformance compared to 183% for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of July 21, 2025 Matt DiLallo has positions in Chevron and Energy Transfer. Neha Chamaria has no position in any of the stocks mentioned. Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chevron. The Motley Fool has a disclosure policy. 3 High-Yield Energy Stocks That Can Survive in Today's Fast-Changing Energy Landscape was originally published by The Motley Fool Sign in to access your portfolio
Globe and Mail
3 days ago
- Business
- Globe and Mail
Is Energy Transfer the Smartest Investment You Can Make Today?
Key Points Energy Transfer pays a lucrative distribution supported by stable cash flow and a strong financial profile. The MLP has lots of growth coming down the pipeline. It currently trades at one of the lowest valuations in its peer group. 10 stocks we like better than Energy Transfer › Energy Transfer (NYSE: ET) offers investors a high-yielding distribution (currently around 7.5%) backed by a rock-solid financial profile. The master limited partnership (MLP) is also growing at a healthy rate, which should continue. To top it off, the company trades at a very attractive valuation. Let's examine these features to determine whether they make Energy Transfer the smartest investment you can make today. A rock-solid income stream Energy Transfer's diversified midstream business generates substantial and stable cash flow, with fee-based contracts backing about 90% of the MLP 's annual earnings. During the first quarter, the company produced $2.3 billion of distributable cash flow. It distributed a little over $1.1 billion of this money to investors, retaining the rest to invest in expansion projects and maintain its strong financial profile. This conservative payout ratio allowed the MLP to maintain its leverage ratio in the lower half of its target range of 4 to 4.5 times. That has the company in its strongest financial position in its history. This strong financial profile makes the MLP's payout highly durable. A fully fueled growth engine Energy Transfer also has a healthy growth profile. The MLP is on track to grow its earnings before interest, taxes, depreciation, and amortization (EBITDA) by around 5% this year. Growth drivers include last year's acquisition of WTG Midstream, recently completed organic expansion projects, and healthy market conditions. The MLP has even more growth ahead. It's investing $5 billion into growth capital projects this year, including several gas processing plants, a major new natural gas pipeline, and some additional export capacity. These growth projects should come online in the second half of 2025 through the end of next year. Given that timeline, Energy Transfer expects these projects will boost its earnings growth rate in the 2026 to 2027 time frame. That provides the MLP with lots of near-term visibility into its earnings growth. Additionally, Energy Transfer is developing several expansion projects, including its Lake Charles LNG facility and a new gas supply line for an AI data center. The MLP has identified three major catalysts -- rising Permian production, increasing gas demand from emerging sectors such as AI data centers, and growing export demand for natural gas liquids -- that will provide it with numerous opportunities to continue expanding its midstream footprint in the years to come. Its ability to secure more new projects would further enhance and extend its earnings growth outlook. Energy Transfer's strong financial position also enables it to continue making accretive acquisitions that complement its operations and growth. The MLP has a long history as a consolidator in the midstream sector, often making at least one major deal each year. Visible earnings growth from its upcoming projects and future expansion opportunities supports the company's plan to deliver 3% to 5% annual distribution increases. All this for an attractive value Despite its strong growth and financial profiles, the MLP currently trades for an enterprise value (EV)-to-EBITDA ratio of less than 9. That's the second-lowest valuation among energy midstream companies, where the peer group average is around 12. This low valuation is a key reason for Energy Transfer's high distribution yield, which enhances its appeal compared to peers. A wise choice Energy Transfer offers a high-yielding distribution and has a strong growth profile. It's also in the best financial shape of its history and has a valuation near the bottom of its peer group. These features make the MLP look like a very attractive investment these days, as it could deliver strong total returns. It's especially smart for those seeking a lucrative and growing passive income stream with potential tax benefits from the Schedule K-1 Federal Tax Form that the MLP sends investors each year. Should you invest $1,000 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 $636,628!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $1,063,471!* Now, it's worth noting Stock Advisor's total average return is 1,041% — a market-crushing outperformance compared to 183% for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of July 21, 2025
Yahoo
3 days ago
- Business
- Yahoo
Is Energy Transfer the Smartest Investment You Can Make Today?
Key Points Energy Transfer pays a lucrative distribution supported by stable cash flow and a strong financial profile. The MLP has lots of growth coming down the pipeline. It currently trades at one of the lowest valuations in its peer group. 10 stocks we like better than Energy Transfer › Energy Transfer (NYSE: ET) offers investors a high-yielding distribution (currently around 7.5%) backed by a rock-solid financial profile. The master limited partnership (MLP) is also growing at a healthy rate, which should continue. To top it off, the company trades at a very attractive valuation. Let's examine these features to determine whether they make Energy Transfer the smartest investment you can make today. A rock-solid income stream Energy Transfer's diversified midstream business generates substantial and stable cash flow, with fee-based contracts backing about 90% of the MLP's annual earnings. During the first quarter, the company produced $2.3 billion of distributable cash flow. It distributed a little over $1.1 billion of this money to investors, retaining the rest to invest in expansion projects and maintain its strong financial profile. This conservative payout ratio allowed the MLP to maintain its leverage ratio in the lower half of its target range of 4 to 4.5 times. That has the company in its strongest financial position in its history. This strong financial profile makes the MLP's payout highly durable. A fully fueled growth engine Energy Transfer also has a healthy growth profile. The MLP is on track to grow its earnings before interest, taxes, depreciation, and amortization (EBITDA) by around 5% this year. Growth drivers include last year's acquisition of WTG Midstream, recently completed organic expansion projects, and healthy market conditions. The MLP has even more growth ahead. It's investing $5 billion into growth capital projects this year, including several gas processing plants, a major new natural gas pipeline, and some additional export capacity. These growth projects should come online in the second half of 2025 through the end of next year. Given that timeline, Energy Transfer expects these projects will boost its earnings growth rate in the 2026 to 2027 time frame. That provides the MLP with lots of near-term visibility into its earnings growth. Additionally, Energy Transfer is developing several expansion projects, including its Lake Charles LNG facility and a new gas supply line for an AI data center. The MLP has identified three major catalysts -- rising Permian production, increasing gas demand from emerging sectors such as AI data centers, and growing export demand for natural gas liquids -- that will provide it with numerous opportunities to continue expanding its midstream footprint in the years to come. Its ability to secure more new projects would further enhance and extend its earnings growth outlook. Energy Transfer's strong financial position also enables it to continue making accretive acquisitions that complement its operations and growth. The MLP has a long history as a consolidator in the midstream sector, often making at least one major deal each year. Visible earnings growth from its upcoming projects and future expansion opportunities supports the company's plan to deliver 3% to 5% annual distribution increases. All this for an attractive value Despite its strong growth and financial profiles, the MLP currently trades for an enterprise value (EV)-to-EBITDA ratio of less than 9. That's the second-lowest valuation among energy midstream companies, where the peer group average is around 12. This low valuation is a key reason for Energy Transfer's high distribution yield, which enhances its appeal compared to peers. A wise choice Energy Transfer offers a high-yielding distribution and has a strong growth profile. It's also in the best financial shape of its history and has a valuation near the bottom of its peer group. These features make the MLP look like a very attractive investment these days, as it could deliver strong total returns. It's especially smart for those seeking a lucrative and growing passive income stream with potential tax benefits from the Schedule K-1 Federal Tax Form that the MLP sends investors each year. 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 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 $636,628!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $1,063,471!* Now, it's worth noting Stock Advisor's total average return is 1,041% — a market-crushing outperformance compared to 183% for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of July 21, 2025 Matt DiLallo has positions in Energy Transfer. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Is Energy Transfer the Smartest Investment You Can Make Today? was originally published by The Motley Fool Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
