Why Aren't More People Talking About Energy Transfer Stock (ET) – Incredible Dividends and Growth Potential?

view original post

Higher dividend yields tend to come at the cost of future earnings growth, and while different firms will have varied ways of performing the balancing act between growth and returning capital to shareholders, I do think there are a few standout names out there that have been able to achieve the best of both worlds. Undoubtedly, more cash given back to investors in the form of dividends or share repurchases comes with a fairly high opportunity cost for firms with stellar growth profiles.

More money paid to investors could have been reinvested in various other initiatives that could have paved the way for even greater capital gains. Of course, the number of growth opportunities could vary over time as the industry landscape shifts and interest rates cause the return on investment to fluctuate. In any case, this piece will look at one top name that not only has a solid, towering dividend yield, but a growth profile that may be understated by many investors.

Enter shares of Energy Transfer (NYSE:ET), which have gained in popularity over the past year or so. For the most part, it’s ET stock’s massive 7.2% dividend yield. But that’s not the only reason the midstream energy firm has quickly become a top pick among strategic passive income investors, especially those who post on social media platforms such as Reddit.

A huge dividend yield, less volatility, and a track record of topping the S&P 500 in recent years?

In prior pieces, I’ve also remarked on the stock’s impressive pace of capital gains in recent years (shares up 157% in five years, outpacing the S&P 500, which had gained just shy of 100% over the same timespan). Additionally, ET stock has beaten the market while experiencing far less volatility at least since the big crash of 2020 that saw shares shed more than 60% of their value. In the past five years, it’s been a fairly smooth ride up with the exception of the mid-2021 pullback and the more recent dip off the all-time highs hit back in January of 2025.

With a 0.75 beta, shares of ET are reasonably less correlated to the broader stock market, making it a great defensive pick for investors who are growing just a bit more wary over the S&P 500’s escalating valuation metrics and the heftier risks of another correction (defined as a sell-off of at least 10% from highs). Given ET stock scores so well across a number of fronts (yield, capital gains potential, and lower volatility), it’s a bit of a mystery as to why more retail investors aren’t treating the name as a staple. Also, ET shares also look dirt-cheap at just over $18 per share, with a 13.73 times trailing price-to-earnings (P/E) multiple, making it a worthy option for value-minded investors.

Of course, the midstream (think pipelines and storage) energy companies aren’t exactly riding on the most exciting thematic tailwinds (think AI and quantum computing) of the year. That said, what I do find exciting is the magnitude of relatively stable free cash flows.

The 2020 distribution cut may have turned off some income investors 

Indeed, healthy, growing, and predictable utility-like cash flows are what income-oriented investors should seek. And while Energy Transfer’s distribution track record isn’t flawless after halving it in 2020 (shares also crumbled violently before climbing back in the following years), I do think that there are ample reasons for income investors seeking a bit of a raise to think more about the company’s road ahead than the bumpy road behind it. 

Currently, ET stock’s dividend appears to be well-supported by cash flows. And while the history of distribution cuts is a stain on an otherwise sound income play, I do think it’s tough to fault the firm in the face of a once-in-a-century pandemic that paved the way for profound and unprecedented shifts in the broad economy.

Of course, income investors want stability and a track record of perseverance through difficult times, given they want a distribution that’ll be paid out in good times and bad. But with a sound growth plan ($5 billion in capital projects to be invested this year) in place and the means to power share price appreciation, I’d not overlook the name as a complement to a diversified portfolio that needs a bit of a yield jolt.

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.