Is Energy Transfer Stock a Buy Now for Income-Focused Portfolios?

Core Viewpoint - Energy Transfer offers a high distribution yield of 7.3% with a plan for annual distribution growth of 3% to 5%, appealing to income-focused investors [1] Company Overview - Energy Transfer operates a significant North American midstream business, facilitating the transportation of oil and natural gas globally [2] - The company employs a toll taker approach, generating revenue through fees for the use of its energy infrastructure [2] Financial Performance - Energy Transfer's cash flows are generally reliable, with the volume of energy transported being more critical than the prices of oil and natural gas [3] - For the first nine months of 2025, the company's distributable cash flow covered its distribution by a strong factor of 1.8x [3] Future Growth Plans - The company has outlined $5 billion in capital spending plans for 2026 to support ongoing business growth [4] - Management has projects extending to 2029, which underpins the anticipated annual distribution growth of 3% to 5% [4] Historical Context - In 2020, Energy Transfer reduced its distribution by 50% during the energy downturn caused by the coronavirus pandemic to strengthen its balance sheet [5] - Although leverage has been reduced and distributions are now higher than pre-cut levels, the previous reduction may still concern income-dependent investors [6] Market Position - While Energy Transfer has attractive features, the midstream sector includes other high-yield options like Enterprise Products Partners and Enbridge, which have a longer history of dividend growth [7] - Investors may prefer these alternatives for potentially lower yields but greater stability during energy downturns [7]