You Can Buy Energy Transfer, but You'd Be Better Off With This High-Yield Stock

The energy sector has long been a haven for dividend-seeking investors, and Energy Transfer LP (ET) currently dominates with its 6.9% yield as of March 2025. However, while ET’s payout is undeniably attractive, there’s a compelling alternative that offers a more balanced combination of yield, stability, and growth potential. This stock isn’t just a close competitor—it’s a superior choice for long-term investors.

Why Energy Transfer Falls Short of the Crown

Energy Transfer’s 6.9% dividend yield is a siren song in a market where many energy stocks hover around 3–5%. Yet, its appeal is tempered by risks:
- Debt Exposure: With a debt-to-equity ratio of 1.42, ET’s leverage is higher than peers, raising concerns about financial flexibility during market downturns.
- Price Volatility: Analysts have trimmed price targets recently—RBC lowered its outlook to $22 due to macroeconomic uncertainty.
- Complex Structure: As a master limited partnership (MLP), ET’s tax obligations and distribution mechanics can complicate investor returns.

The Superior Option: Enterprise Products Partners (EPD)

Enter Enterprise Products Partners (EPD), which offers a 6.4% dividend yield—slightly below ET’s but paired with a 27-year track record of consecutive dividend increases. This consistency, combined with EPD’s fortress-like balance sheet and diversified infrastructure, makes it a safer, smarter bet.

Key Advantages of EPD Over ET:

1. Infrastructure Dominance:
   EPD operates over 50,000 miles of pipelines, handling everything from crude oil to NGLs. This network ensures stable cash flows, even as energy demand fluctuates.
   

2. Lower Leverage, Higher Safety:
   While ET’s debt-to-equity ratio is 1.42, EPD’s is 0.80, signaling stronger financial resilience. Its current ratio (liquidity) of 1.12 also aligns with ET’s, but with less reliance on debt.

3. Growth Catalysts:
   EPD’s recent investments in LNG export facilities and petrochemical infrastructure position it to capitalize on global energy demand. Unlike ET, which faces regulatory and project execution risks (e.g., permitting delays), EPD’s projects are often shovel-ready.

4. Analyst Consensus:
   Analysts project a 14% upside for EPD from its March 2025 price of $32.50, slightly below ET’s 17% but with less downside risk. JPMorgan’s Arun Jayaram (ranked #943) recently noted EPD’s “excellent asset portfolio” and reaffirmed a Buy rating.

The Total Return Case: Yield + Safety + Growth

While ET’s yield edge is undeniable, EPD’s combination of a 6.4% dividend yield and 14% upside potential delivers a total return of ~20.4% annually—versus ET’s ~23.9% (6.9% + 17%). The difference is small, but EPD’s lower risk profile and dividend reliability make it the better trade-off.

Moreover, EPD’s 27-year dividend growth streak underscores its management’s commitment to shareholders—a stark contrast to ET’s history of distribution cuts during downturns.

Conclusion: Why EPD Wins the High-Yield Energy Game

Enterprise Products Partners (EPD) isn’t just a close second to Energy Transfer—it’s the smarter pick for income investors. With a 6.4% yield, 27 years of dividend growth, and a debt-to-equity ratio half that of ET, EPD balances yield with stability. Its infrastructure dominance and growth-oriented projects also position it to thrive in both bullish and bearish markets.

While ET’s 6.9% yield may grab headlines, investors should prioritize sustainable returns over short-term highs. EPD’s proven track record and prudent financials make it the top choice for those seeking high yield without overexposure to risk. In volatile markets, this balance is worth every basis point of yield sacrificed.

Invest accordingly.