Why Energy Transfer Is a High-Yield Buy Despite Its Risks

In the realm of midstream energy investing, few names command as much attention as Energy Transfer LP (NYSE: ET). With a dividend yield of 7.64%—calculated from its $1.32 annualized payout and a current share price of $17.28—Energy Transfer offers a tantalizing proposition for income-focused investors. Yet, as with all high-yield opportunities, the question remains: Is this yield sustainable, and how do its risks align with its rewards?

The Allure of Yield: A Calculated Proposition

Energy Transfer's 7.64% yield is not merely a number; it reflects a disciplined approach to capital returns. The company's quarterly distribution of $0.33 per unit, a 3% increase from the prior year, underscores its commitment to unitholders. This growth, coupled with a Distributable Cash Flow (DCF) of $1.96 billion in Q2 2025, demonstrates that the payout is underpinned by tangible cash generation.

The yield's attractiveness is further amplified by Energy Transfer's asset base. Spanning over 140,000 miles of pipeline and infrastructure, the company's operations are diversified across natural gas, midstream, and NGL/ refined products. Notably, 40% of its Adjusted EBITDA—$3.87 billion in Q2 2025—derives from natural gas-related assets, which are largely fee-based. This structure insulates the company from commodity price volatility, a critical advantage in an era of erratic energy markets.

Financial Health: Strength in Leverage and Liquidity

Energy Transfer's balance sheet is a testament to its operational resilience. With total debt of $60.7 billion and an implied debt-to-EBITDA ratio of 3.71–3.77, the company remains within the acceptable range for infrastructure firms. Its $2.51 billion in available borrowing capacity, coupled with the recent redemption of $500 million in high-cost preferred units, signals a proactive approach to capital structure optimization.

The company's liquidity is further bolstered by its 2025 guidance: Adjusted EBITDA is expected to range between $16.1 billion and $16.5 billion, with growth capital expenditures of $5 billion. This disciplined capital allocation—focusing on projects like the Transwestern Pipeline expansion and Lake Charles LNG—positions Energy Transfer to enhance cash flows without overleveraging.

Risks: Navigating the Storm

No investment is without peril. Energy Transfer's exposure to commodity prices, regulatory hurdles, and interest rate fluctuations cannot be ignored. For instance, the Transwestern Pipeline expansion faces permitting delays, while rising interest rates could increase the cost of its $60.7 billion in long-term debt.

Yet, these risks are mitigated by the company's strategic diversification. Fee-based contracts, which account for most of its segment margins, reduce reliance on commodity swings. Additionally, its scale—$59.3 billion market cap—provides a buffer against project-specific setbacks. The key for investors is to assess whether the company's risk management practices align with their own tolerance for volatility.

Trust in Midstream: A Long-Term Perspective

Midstream energy investing demands trust in the durability of infrastructure and the stability of cash flows. Energy Transfer's track record—consistent DCF growth, a 3% annualized distribution increase over the past decade, and a beta of 0.79—suggests that this trust is warranted. The company's ability to navigate the 2020 energy crisis and emerge with a stronger balance sheet is a case in point.

However, trust must be earned. Investors should monitor the company's ability to meet its 2025 EBITDA guidance and manage capital expenditures effectively. The recent slight contraction in DCF ($1.96 billion vs. $2.04 billion in 2024) is a reminder that no company is immune to macroeconomic headwinds.

Conclusion: Balancing the Equation

Energy Transfer is not a risk-free investment, but it is a high-yield opportunity that rewards those who understand the balance between risk and reward. Its 7.64% yield, supported by a robust asset base and disciplined capital structure, makes it a compelling buy for investors seeking income with a margin of safety.

For those willing to accept the risks—commodity exposure, regulatory uncertainty, and interest rate sensitivity—Energy Transfer offers a rare combination of yield and growth potential. As the energy transition unfolds, the company's infrastructure-centric model may prove more resilient than many of its peers.

In the end, the decision to invest hinges on one question: Can you trust Energy Transfer to navigate the storms ahead? For those who answer yes, the rewards may well justify the risks.