Energy Transfer: A Pipeline to… Well, Something

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Alright, folks, let’s talk about Energy Transfer (ET 0.17%). Now, I’ve seen more trustworthy characters in a vaudeville show, but this company… it might be turning a corner. They’ve got a history, shall we say, of making decisions that would make a seasoned gambler weep. A canceled merger in 2016? A dividend cut in 2020? Oy vey! It’s enough to make a man reconsider his life choices. But for those of us who like a little excitement with our income – and a 7.3% yield is certainly something – it’s worth a look. Think of it as a distressed asset with a potential punchline.

What Does Energy Transfer Do, Anyway?

They move stuff. Oil, gas, the occasional rogue beach ball. They’re in the “midstream” business, which sounds suspiciously like a spy novel, but it just means they own the pipelines and storage facilities that get energy from Point A to Point B. They charge a fee, which is nice, because nobody likes working for free. And here’s the beautiful part: the price of oil and gas going up or down? Schmaltz! Doesn’t matter much. As long as the stuff is moving, they’re making money. It’s like a toll booth on the highway of hydrocarbons. A surprisingly reliable business, wouldn’t you say? Even when the world is going bananas, people still need to heat their homes and drive their cars. It’s a basic need, like a good pastrami on rye.

Now, that reliability translates into cash flow, and a lot of it. They’re currently covering that hefty distribution – that 7.3% yield, remember? – by a solid 1.8x. That’s like having enough herring to feed a small army. And they’re aiming for 3-5% annual growth. A modest goal, perhaps, but in this market, a little consistency goes a long way. It’s not going to make you a billionaire overnight, but it might buy you a decent condo in Boca.

They’re planning to throw a whopping $5.5 billion at capital investments by 2026. Mostly into natural gas, because apparently, that’s the “transition fuel” these days. It’s like switching from a horse-drawn carriage to a slightly less polluting horse-drawn carriage. But hey, progress is progress, right? They’ve got projects lined up all the way to 2029, which, if my calculations are correct, is… in the future. Shocking, I know.

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Let’s do some quick math, shall we? 7% yield plus 3% growth… that’s 10%. That’s roughly what most investors expect from the entire market. So, Energy Transfer could potentially deliver that… and maybe even a complimentary bagel. Not a bad deal, if you ask me.

Looking Past Previous Decisions (Or, How to Forgive and Invest)

Okay, let’s address the elephant in the room – that dividend cut in 2020. It wasn’t pretty, but they used it to clean up their balance sheet. Think of it as a financial detox. And that scuttled merger? That was the old CEO’s idea. A different regime is in charge now. New leaders, new brooms, and hopefully, fewer questionable decisions. For those of us willing to overlook a little past misbehavior, Energy Transfer could be on the verge of becoming… wait for it… a boring, reliable income stock. I know, it’s a radical concept. But hey, sometimes the most exciting thing is a little stability. It’s like a nice, quiet evening at home… with a 7.3% yield.

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2026-01-27 09:12