Energy Transfer. (ET 0.49%) They deal in pipelines, mostly. And promises. Promises are cheap, of course. So it goes. The company wants you to believe it’s positioned for…growth. Slow growth. Steady growth. As if those two things always travel together. If you can forgive a past littered with broken expectations, let’s look at the next ten years. It’s a long time, even for pipelines.
A History of Disappointments
Trust. That’s a funny thing to ask for from a company that once halved its dividend. It happened in 2020, a year when everything felt like a bad dream. The world was ending, or so it seemed, and Energy Transfer decided to join the party. Other pipeline companies, like Enterprise Products Partners and Enbridge, kept the checks coming. They weren’t saints, mind you, just less…enthusiastic about sudden austerity.
Then there was the Williams Companies debacle. 2016. They tried to buy them, then got cold feet. A deal that might have meant a dividend cut. So they issued some securities, convertibles, to soothe the investors. The CEO bought a lot of them. A lot. It smelled faintly of…well, you can imagine. The deal fell apart, naturally. It always does. And investors were left wondering who was being looked after.
But things are different now, they say. The old CEO is gone. The dividend is growing again, even surpassing its pre-2020 levels. They’re promising 3% to 5% annual growth. Sounds…optimistic. But then, what isn’t these days? It’s a small number, really. A whisper in the grand scheme of things.
The Illusion of Double Digits
Currently, the distribution yield is 7.4%. Add 3%, and you get just over 10%. Ten percent. People like that number. It sounds…substantial. Like a shield against the inevitable. The broader market expects 10% returns over time. A convenient fiction, perhaps.
Let’s do the math, shall we? It’s a dangerous game, math. Dividend stocks like to stay within certain yield ranges. When the dividend goes up, the stock price tends to adjust. Currently, the distribution is $1.33 per unit. A 3% growth rate would bring that to $1.79 in a decade. 5% would get you to $1.82.
If the unit price stays the same, those rates would translate to around 10% yields. But, of course, the price won’t stay the same. It will rise, slowly, if the distribution grows. To maintain that 7.4% yield, the unit price would need to climb to around $24. Slow and steady distribution growth equals slow and steady price growth. It’s a comforting thought, if you don’t think about it too hard.
A Gem, Perhaps, But Still a Stone
If you can overlook the past – and why wouldn’t you, everyone does – Energy Transfer could be an attractive income stock. It’s a way to maximize the income your portfolio generates. The 3% to 5% forecast is enough to keep the distribution growing above inflation. So even if you spend every penny, you might just maintain your buying power. Any capital appreciation is just…extra. A bonus. A small miracle.
It’s all a bit sad, really. We chase these numbers, these yields, as if they can protect us from the inevitable. From the entropy of the universe. From the realization that everything, eventually, fades away. So it goes.
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2026-01-30 19:22