Energy Transfer’s LNG Gambit: Can a Decade-Old Project Ignite Dividend Growth?

Energy Transfer (NYSE: ET) has long been a stalwart of the U.S. energy infrastructure sector, renowned for its sprawling network of pipelines and its generous dividend yield. Yet, its ability to sustain—or grow—that dividend hinges on projects that can inject new life into cash flows. The company’s April 2025 agreement with MidOcean Energy to revive the Lake Charles LNG export terminal is precisely such a catalyst. This partnership, years in the making, could finally unlock the value of a project that has languished for over a decade and position Energy Transfer to fuel its high-yielding distribution.

The Lake Charles Pivot: Risk Mitigation and Cash Flow Creation

The Lake Charles LNG project has been a thorn in Energy Transfer’s side since its initial proposal in 2013. Regulatory uncertainty, shifting market dynamics, and capital constraints delayed its Final Investment Decision (FID), leaving its future in limbo. The April 2025 deal with MidOcean Energy changes that calculus. By ceding 30% ownership to MidOcean in exchange for $1.5 billion in funding, Energy Transfer reduces its upfront capital burden while retaining control over 70% of the terminal’s output. This strategic move aligns with CEO Tom Long’s stated goal of “maximizing returns while minimizing execution risk.”

The terminal’s 16.5 million-ton annual capacity, once operational, will generate two key revenue streams for Energy Transfer: direct ownership of LNG sales and increased gas transportation volumes on its pipelines. MidOcean’s 30-year gas-transportation agreements guarantee steady demand for Energy Transfer’s Trunkline system, a critical artery for U.S. Gulf Coast natural gas. As Long noted, this “locks in significant incremental cash flows,” a lifeline for a company whose distributable cash flow (DCF) per unit has stagnated in recent years.

The LNG Market’s Role in Dividend Sustainability

The LNG sector’s resurgence is central to Energy Transfer’s ambitions. With global LNG demand expected to grow at a 2.8% compound annual rate through 2030 (per Rystad Energy), the U.S. Gulf Coast is poised to become a major exporter. Lake Charles’ 16.5 million tons per year capacity—already 70% contracted—positions Energy Transfer to capture this demand. Long-term agreements with Shell and Chevron, covering over 4 million tons annually, reduce revenue volatility, a critical factor for sustaining the current 8% dividend yield.

However, the dividend’s growth potential hinges on Lake Charles’ timely completion. Delays beyond 2026 (the project’s targeted in-service date) could strain cash flow. Energy Transfer’s current leverage ratio—already elevated at 5.2x net debt/EBITDA—leaves little room for missteps. Yet, the MidOcean partnership reduces construction risk, as institutional backers like EIG (MidOcean’s parent) are incentivized to push the project to FID by year-end.

Peer Comparisons and Market Sentiment

Energy Transfer’s yield of 8% stands out in a landscape where most midstream peers trail behind. Kinder Morgan (KMI) yields 5.8%, while Targa Resources (TRGP) offers 6.3%. This gap reflects both ET’s higher risk and its growth potential. The Lake Charles project could narrow that risk-reward gap:

Analysts at Bank of America have already taken notice, naming ET a “top pick” in Q2 2025 for its LNG exposure and dividend resilience. Still, skeptics point to the sector’s cyclical nature. A drop in LNG prices or a slowdown in global demand could pressure margins.

Conclusion: A High-Reward, High-Risk Gambit

Energy Transfer’s Lake Charles deal is a masterclass in risk mitigation. By offloading 30% of the project’s costs and securing long-term contracts, the company has laid the groundwork for a cash flow inflection point. If completed on schedule, the terminal could add over $1 billion annually to EBITDA by 2027, per management estimates—enough to cover the current $2.8 billion annual dividend payout comfortably and potentially enable growth.

Yet, execution remains key. Regulatory approvals, construction timelines, and global LNG prices will determine whether this decade-old project finally delivers. For income-focused investors, the 8% yield acts as a floor, while Lake Charles represents upside. The data speaks clearly: with 70% of capacity contracted and a partner committed to funding, Energy Transfer has moved closer to reigniting dividend growth. The question now is not whether it can sustain the payout, but whether it can finally turn the spigot higher.

In a sector where patience is a virtue, Energy Transfer’s LNG bet may finally pay off—proving that sometimes, the best dividends come to those who wait.