Is Energy Transfer Stock a Buy Now?

Courtney Carlsen, The Motley Fool

Sun, Jun 29, 2025, 5:14 PM 5 min read

• Energy Transfer boasts a dividend yield of 7.1%, making it a popular choice for income-focused investors.

• The midstream operator has a diversified portfolio of energy infrastructure across key U.S. energy basins.

• There are specific tax implications associated with investing in master limited partnerships such as Energy Transfer.

• 10 stocks we like better than Energy Transfer ›

If you're on the hunt for an investment that can provide a steady stream of passive income, look no further than dividend stocks. One that stands out is Energy Transfer (NYSE: ET), which boasts an impressive 7.1% dividend yield. What makes Energy Transfer particularly attractive is its stable cash flow from midstream operations.

With the surge in oil and gas production across the U.S. and a regulatory landscape becoming increasingly favorable for expansion, Energy Transfer is well positioned. Here's what investors should know today.

The first thing investors should be aware of is that Energy Transfer operates as a master limited partnership (MLP). MLPs don't pay taxes at the corporate level. Instead, profits are distributed to investors (limited partners), allowing MLPs to return more cash to their unitholders compared to typical corporations. This is why Energy Transfer offers an appealing distribution yield of over 7%.

As a midstream operator, Energy Transfer earns revenue by transporting, storing, and processing oil, gas, and natural gas liquids under long-term contracts. Its contracts are often fee-based, which can help stabilize revenue. This reliable cash flow also enables consistent, high distributions to investors, which the company aims to grow between 3% to 5% annually.

Energy Transfer boasts one of the largest and most diversified portfolios of energy infrastructure in the United States, including major natural gas liquids, crude oil, and natural gas pipelines, as well as storage facilities, export terminals, and processing plants.

Its scale provides it with geographic reach across key basins, enabling it to serve upstream drillers, downstream refiners, and other markets. Its location in those key regions means it benefits from the network effect. In other words, as more producers and end users connect, its infrastructure becomes more valuable.

With the U.S. aiming to increase energy production and achieve American energy dominance under President Donald Trump, Energy Transfer stands to benefit from higher volumes being transported and processed across its extensive infrastructure network.