Energy Transfer Delivers High-Octane Growth to Complement Its High-Yielding Dividend

Transferring energy (ET 4.03%) is better known for its large cash payouts. The payout from its master limited partnership (MLP) is currently around 8%. This is several times higher than S&P500‘S Dividend yield 1.5%.

The high dividend is only part of the attractiveness of this solution. This MLP this year is also growing at a rapid paceFor this reason, may have high-octane production fuel total returns.

Pressing the gas

Energy Transfer recently reported solid second-quarter results. The midstream company generated nearly $3.8 billion in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) in the periodup 20% from the previous year. Meanwhile, distributable cash flow increased 32% to more than $2 billion.

MLP provided strong volumes across all its operations, including record results in the following categories:

• Oil transportation (up 23%)
• Natural Gas Liquids (NGL) Exports (up 3%)
• NGL transport volumes (up 4%)
• NGL and refined products final volumes (up 4%)

The company benefited from the good market situation, recently completed expansion projects, and acquisitions. The midstream company closed on its $1.5 billion acquisition of Lotus Midstream in May 2023 and its $7.1 billion merger with Crestwood Equity Partners in November. It also completed the Bear processing plant in June last year and Frac VII in August last year.

Energy Transfer generated enough cash to cover distribution costs By almost twice ($1.1 billion in dividends paid to investors during the period). This allowed the company to retain all the money it needed to cover growth capital expenditures ($549 million) and provide additional cash that helped fund the $3.1 billion acquisition of WTG Midstream, which was completed in July.

More growth will come down pipeline

Strong performance from its core Energy Transfer business and recently completed acquisition of WTG Midstream have given it confidence to enhance its full-year growth prospects. The MLP now expects full-year adjusted EBITDA to be between $15.3 billion and $15.5 billion (compared to the prior range of $15 billion to $15.3 billion). This represents a 12% increase from last year’s midyear level.

The MLP also raised its growth capital spending guidance. It now expects to invest $3 billion to $3.2 billion in growth capital projects this year, up from its previous guidance of $2.8 billion to $3 billion. Fueling this growth is growth capital projects related to the acquisition of WTG Midstream; and accelerated turnaround projects in the oil transportation and services segment related to the merger with Crestwood.

Energy Transfer’s backlog includes planned development capital projects come online by the end of 2026. This is what MLP provides onslaught visibility down its future growth and helps support plan to increase distribution by 3% to 5% for a year.

Meanwhile, the company has several other projects in the works that could further boost its long-term growth prospects. These include a proposed LNG export project from Lake Charles, the Blue Marlin Seaport, a blue ammonia hub and carbon capture and sequestration projects.

Energy Transfer also has the financial flexibility to pursue acquisitions and other investments as opportunities arise. It recently completed the highly accretive acquisition of WTG Midstream.

In another accretion transaction, the MLP formed a joint venture with Sunoco to combine their crude oil and produced collecting water assets in the Permian Basin. These actions are a continuation of MLP’s strategy to be a leading consolidator in the midstream sector.

Income and growth

Energy Transfer is currently experiencing rapid growth. The MLP has made several acquisitions that, along with organic expansions, will keep it on track to deliver rapid growth in the coming quarters.

This should give it the fuel to continue to expand its high-yield distribution. These factors make it an attractive option for those looking for growth and income.

Matt DiLallo has a position in Energy Transfer. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.