What's Next for Energy Transfer Stock and Its 8% Dividend Yield?
Energy Transfer Stock Analysis
Why the stock may be one of the best investments for income-oriented investors. Since the start of 2022, Energy Transfer (NYSE: ET)has increased its distribution every quarter. However, everything has not always been smooth for the company. In fact, back in 2020, the midstream company slashed its distribution in half.
A midstream giant
Energy Transfer is an integrated midstream company that transports hydrocarbons such as natural gas, natural gas liquids (NGLs), crude oil, and refined products.
- The company's operations expand the midstream spectrum from gathering and processing to fractionation, storage, and transport.
- Approximately 90% of Energy Transfer's 2024 earnings before interest, taxes, depreciation, and amortization (EBITDA) is projected to come from fee-based activities.
Growth opportunities
Energy Transfer has built out one of the largest midstream networks in North America through a combination of organic growth projects and acquisitions.
- The company is looking to spend between $2 billion to $3 billion a year in growth capex over the next several years.
- Energy Transfer's distribution is currently well covered by its cash flow, with the company generating free cash flow after distributions of about $3.6 billion in 2023.
On top of that, Energy Transfer is one of the cheapest large-cap stocks in the midstream sector.
More upside ahead
If Energy Transfer were traded at valuations closer to its MLP peers, it could have a lot of price upside ahead.
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This article was prepared using information from open sources in accordance with the principles of Ethical Policy. The editorial team is not responsible for absolute accuracy, as it relies on data from the sources referenced.