Should You Buy Energy Transfer or This High-Yield Alternative?

Energy Transfer (NYSE: ET) is offering a very attractive yield of about 7.6% today. The broader market's yield is a miserly 1.3%, while the average energy stock's yield is around 3%. But dividend investors shouldn't jump on Energy Transfer just yet. This alternative, with a 6.9% yield, might end up being a better pick. Here's why.From a big-picture perspective, Energy Transfer is a midstream business. That means it owns the energy infrastructure, like pipelines and storage assets, that help to move oil and natural gas around the world. It basically sits between the upstream (drillers) and the downstream (chemicals and refiners) and charges fees for the use of its vital energy assets. That model is similar to a toll on a bridge.The good news is that the energy industry would come to a screeching halt if the midstream sector were to disappear. It doesn't really matter if oil prices are high or low -- it has to be moved, and that is what Energy Transfer makes happen. Cash flows tend to be fairly reliable through the cycle for midstream businesses.Continue reading

Apr 20, 2025 - 09:19

Energy Transfer (NYSE: ET) is offering a very attractive yield of about 7.6% today. The broader market's yield is a miserly 1.3%, while the average energy stock's yield is around 3%. But dividend investors shouldn't jump on Energy Transfer just yet. This alternative, with a 6.9% yield, might end up being a better pick. Here's why.

From a big-picture perspective, Energy Transfer is a midstream business. That means it owns the energy infrastructure, like pipelines and storage assets, that help to move oil and natural gas around the world. It basically sits between the upstream (drillers) and the downstream (chemicals and refiners) and charges fees for the use of its vital energy assets. That model is similar to a toll on a bridge.

The good news is that the energy industry would come to a screeching halt if the midstream sector were to disappear. It doesn't really matter if oil prices are high or low -- it has to be moved, and that is what Energy Transfer makes happen. Cash flows tend to be fairly reliable through the cycle for midstream businesses.