Investment Opportunities in Energy Midstream Sector
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Mar 14 2026
0mins
Source: Fool
- Attractive Energy Transfer: Energy Transfer (ET) offers a 7.1% dividend yield with a distribution coverage ratio of nearly 1.8 times last quarter, indicating strong cash flow and growth potential, with expected annual distribution growth of 3% to 5% moving forward.
- Stability of Enterprise Products Partners: Enterprise Products Partners (EPD) has raised its distribution for 27 consecutive years, currently yielding 5.9%, and is projected to see double-digit growth in adjusted EBITDA and cash flow by 2027, showcasing resilience amid market fluctuations.
- Genesis Energy's Transformation: Genesis Energy (GEL) has significantly reduced interest expenses by selling its volatile soda ash operations and replacing high-interest debt, projecting EBITDA growth of 15% to 20% in 2026, indicating strong growth potential.
- High Leverage with Growth Potential: Despite a leverage ratio of 5.12 times, Genesis Energy has no major capex this year and a distribution coverage ratio of 2.8 times last quarter, demonstrating its ability to reduce leverage in the coming years while raising its quarterly distribution by 9%, reflecting confidence in its business.
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Analyst Views on ET
Wall Street analysts forecast ET stock price to rise
11 Analyst Rating
7 Buy
4 Hold
0 Sell
Moderate Buy
Current: 19.420
Low
17.00
Averages
20.65
High
23.00
Current: 19.420
Low
17.00
Averages
20.65
High
23.00
About ET
Energy Transfer LP owns and operates a diversified portfolios of energy assets in the United States, with more than 140,000 miles of pipeline and associated energy infrastructure. The Company’s strategic network spans 44 states with assets in all of the major United States production basins. Its core operations include complementary natural gas midstream, intrastate and interstate transportation and storage assets; crude oil, natural gas liquids (NGL) and refined product transportation and terminalling assets; and NGL fractionation. The Company’s segments include intrastate transportation and storage, interstate transportation and storage, midstream, NGL and refined products transportation and services, crude oil transportation and services, investment in Sunoco LP, investment in USA Compression Partners, LP (USAC), and all other. It also owns Lake Charles LNG Company, LLC, its wholly owned subsidiary, which owns an LNG import terminal and regasification facility.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
Stable Dividend Performance of High-Yield Stocks
- Ares Capital's Stable Dividends: Ares Capital has paid a stable or growing dividend for over 16 consecutive years, currently offering a quarterly dividend of $0.48 per share, with a high yield of 10.2% reflecting its strong financial health and earnings capacity, making it appealing to risk-tolerant investors despite its higher risk profile.
- Energy Transfer's Strong Cash Flow: Energy Transfer generated $2.7 billion of distributable cash flow in the first quarter, easily covering nearly $1.2 billion in distributions, and plans to invest between $5.5 billion and $5.9 billion in organic expansion projects in 2023, which is expected to drive its distribution growth by 3% to 5% annually.
- Starwood Property's Consistent Dividends: Starwood Property Trust, a real estate investment trust, has maintained its quarterly dividend rate of $0.48 for over a decade, and although its distributable earnings were $0.39 per share in the first quarter, it has $3.87 per share in unrealized distributable earnings to support its dividend, showcasing its sustainability.
- Attracting Risk Investors: Ares Capital, Energy Transfer, and Starwood Property currently offer dividend yields up to 11.2%, and despite the overall low dividend yields in the market, these companies attract income-seeking investors through their stable dividend strategies, demonstrating their competitiveness in the current market environment.
See More
Three High-Yield Stocks to Boost Dividend Income
- Ares Capital's High Yield: Ares Capital (ARCC) currently offers a dividend yield of 10.2%, necessitated by its requirement to distribute 90% of taxable net income, ensuring sustainability and demonstrating competitive strength in high-risk dividend stocks with over 16 years of stable growth.
- Energy Transfer's Cash Flow: Energy Transfer (ET) generated $2.7 billion of distributable cash flow in Q1, easily covering nearly $1.2 billion in distributions, while planning to invest between $5.5 billion and $5.9 billion in organic expansion projects in 2023, which is expected to drive annual dividend growth of 3% to 5%.
- Starwood Property Trust's Stability: Starwood Property Trust (STWD) boasts an 11.2% dividend yield, maintaining a quarterly dividend of $0.48 for over a decade; despite Q1 distributable earnings falling short of dividends, it holds $3.87 per share in unrealized distributable earnings, ensuring dividend security.
- Investment Opportunities for Risk Tolerance: Ares Capital, Energy Transfer, and Starwood Property all present high-yield dividends, making them attractive for risk-tolerant investors to bolster dividend income in June, highlighting the necessity of seeking appealing investments in a low-yield environment.
See More
Analysis of Dividend Growth Potential in Energy Stocks
- Chevron's Dividend Advantage: Chevron has increased its dividend for 39 consecutive years and expects earnings per share and free cash flow to grow by at least 10% annually, making its 3.9% forward dividend yield sustainable and attractive to income investors.
- Energy Transfer's High Yield Distribution: Energy Transfer offers a distribution yield of 6.9%, which was reduced during the pandemic but has since recovered and surpassed pre-pandemic levels, demonstrating the company's strong distribution capacity amid rising natural gas demand.
- Enterprise Products Partners' Solid Finances: Enterprise Products Partners has increased its distribution for 27 consecutive years, with a distribution yield exceeding 5.7%, and its robust balance sheet with $3.3 billion in liquidity ensures continued dividend sustainability, appealing to income investors.
- Natural Gas Demand Drivers: With the increasing demand for natural gas from AI data centers, Chevron, Energy Transfer, and Enterprise Products Partners are all well-positioned to benefit and drive future dividend growth.
See More
Top High-Yield Energy Stocks to Buy Now
- Chevron's Steady Growth: Chevron (CVX), the world's third-largest energy company, has increased its dividend for 39 consecutive years, with a current yield of approximately 3.9%, and is expected to grow earnings per share and free cash flow by at least 10% annually, which will further drive dividend increases and enhance investor confidence.
- Energy Transfer's High Yield: Energy Transfer (ET) operates over 144,000 miles of pipelines, currently offering a distribution yield of 6.9%, and despite a temporary reduction during the pandemic, it has now surpassed pre-pandemic levels, positioning itself to benefit from the growing demand for natural gas, particularly from AI data centers.
- Enterprise Products Partners' Financial Strength: Enterprise Products Partners (EPD) has increased its distribution for 27 consecutive years, with a yield exceeding 5.7%, and its strong balance sheet with around $3.3 billion in liquidity gives it the highest credit rating in the midstream energy sector, allowing it to capitalize on rising natural gas demand.
- Driving Natural Gas Demand: As AI data centers increase their electricity needs, natural gas emerges as the ideal fuel, with Chevron, Energy Transfer, and Enterprise Products Partners actively signing supply agreements to secure competitive advantages in the future market.
See More
Long-Term Investment Outlook for Energy Stocks
- Energy Transition Opportunities: With surging oil prices due to the war with Iran and the closure of the Strait of Hormuz, energy stocks have received a strong boost this year, particularly in the midstream sector where pipeline companies benefit from their fee-based models and are expected to see long-term growth.
- Growth Potential of Energy Transfer: Energy Transfer (ET) owns one of the largest midstream systems in the U.S., with a projected capital expenditure budget between $5.5 billion and $5.9 billion for 2023, and its strong position in the Permian Basin is expected to yield mid-teens returns.
- Stability of Enterprise Products Partners: Enterprise Products Partners (EPD) has increased its distribution for 27 consecutive years and is expected to generate $1 billion in free cash flow this year for debt repayment and stock buybacks, showcasing its robust performance in the midstream space.
- Growth Strategy of Williams Companies: Williams Companies (WMB) plans to invest $7 billion to $7.6 billion in growth projects in 2023, with a backlog of $15.5 billion in transmission projects and $9.6 billion in power solutions, aiming for over 20% return on invested capital and becoming a key energy supplier for AI data centers.
See More
Jefferies Upgrades Energy Transfer to Buy with $23 Price Target
- Rating Upgrade: Jefferies has upgraded Energy Transfer from Hold to Buy, raising the price target from $21 to $23, reflecting the company's ongoing success in natural gas and liquids, alongside potential benefits from rising commodity prices.
- Improved Fundamentals: Analyst Julien Dumoulin-Smith notes that Energy Transfer's fundamentals are stronger than when coverage began, driven by U.S. production trends and rising gas-oil ratios in the Permian, indicating enhanced competitive positioning.
- Project Acceleration: The company has sanctioned over $9 billion in projects since December 2024, which is expected to drive an EBITDA compound annual growth rate of approximately 4.8%, significantly above Wall Street consensus, highlighting the company's growth potential.
- Capital Expenditure Outlook: Energy Transfer anticipates $5 billion to $5.5 billion in annual growth capex through FY 2030, with the analyst suggesting that this forecast may underestimate the company's actual growth opportunities, further boosting investor confidence.
See More
Stable Dividend Performance of High-Yield Stocks
- Ares Capital's Stable Dividends: Ares Capital has paid a stable or growing dividend for over 16 consecutive years, currently offering a quarterly dividend of $0.48 per share, with a high yield of 10.2% reflecting its strong financial health and earnings capacity, making it appealing to risk-tolerant investors despite its higher risk profile.
- Energy Transfer's Strong Cash Flow: Energy Transfer generated $2.7 billion of distributable cash flow in the first quarter, easily covering nearly $1.2 billion in distributions, and plans to invest between $5.5 billion and $5.9 billion in organic expansion projects in 2023, which is expected to drive its distribution growth by 3% to 5% annually.
- Starwood Property's Consistent Dividends: Starwood Property Trust, a real estate investment trust, has maintained its quarterly dividend rate of $0.48 for over a decade, and although its distributable earnings were $0.39 per share in the first quarter, it has $3.87 per share in unrealized distributable earnings to support its dividend, showcasing its sustainability.
- Attracting Risk Investors: Ares Capital, Energy Transfer, and Starwood Property currently offer dividend yields up to 11.2%, and despite the overall low dividend yields in the market, these companies attract income-seeking investors through their stable dividend strategies, demonstrating their competitiveness in the current market environment.
See More
Three High-Yield Stocks to Boost Dividend Income
- Ares Capital's High Yield: Ares Capital (ARCC) currently offers a dividend yield of 10.2%, necessitated by its requirement to distribute 90% of taxable net income, ensuring sustainability and demonstrating competitive strength in high-risk dividend stocks with over 16 years of stable growth.
- Energy Transfer's Cash Flow: Energy Transfer (ET) generated $2.7 billion of distributable cash flow in Q1, easily covering nearly $1.2 billion in distributions, while planning to invest between $5.5 billion and $5.9 billion in organic expansion projects in 2023, which is expected to drive annual dividend growth of 3% to 5%.
- Starwood Property Trust's Stability: Starwood Property Trust (STWD) boasts an 11.2% dividend yield, maintaining a quarterly dividend of $0.48 for over a decade; despite Q1 distributable earnings falling short of dividends, it holds $3.87 per share in unrealized distributable earnings, ensuring dividend security.
- Investment Opportunities for Risk Tolerance: Ares Capital, Energy Transfer, and Starwood Property all present high-yield dividends, making them attractive for risk-tolerant investors to bolster dividend income in June, highlighting the necessity of seeking appealing investments in a low-yield environment.
See More
Analysis of Dividend Growth Potential in Energy Stocks
- Chevron's Dividend Advantage: Chevron has increased its dividend for 39 consecutive years and expects earnings per share and free cash flow to grow by at least 10% annually, making its 3.9% forward dividend yield sustainable and attractive to income investors.
- Energy Transfer's High Yield Distribution: Energy Transfer offers a distribution yield of 6.9%, which was reduced during the pandemic but has since recovered and surpassed pre-pandemic levels, demonstrating the company's strong distribution capacity amid rising natural gas demand.
- Enterprise Products Partners' Solid Finances: Enterprise Products Partners has increased its distribution for 27 consecutive years, with a distribution yield exceeding 5.7%, and its robust balance sheet with $3.3 billion in liquidity ensures continued dividend sustainability, appealing to income investors.
- Natural Gas Demand Drivers: With the increasing demand for natural gas from AI data centers, Chevron, Energy Transfer, and Enterprise Products Partners are all well-positioned to benefit and drive future dividend growth.
See More
Top High-Yield Energy Stocks to Buy Now
- Chevron's Steady Growth: Chevron (CVX), the world's third-largest energy company, has increased its dividend for 39 consecutive years, with a current yield of approximately 3.9%, and is expected to grow earnings per share and free cash flow by at least 10% annually, which will further drive dividend increases and enhance investor confidence.
- Energy Transfer's High Yield: Energy Transfer (ET) operates over 144,000 miles of pipelines, currently offering a distribution yield of 6.9%, and despite a temporary reduction during the pandemic, it has now surpassed pre-pandemic levels, positioning itself to benefit from the growing demand for natural gas, particularly from AI data centers.
- Enterprise Products Partners' Financial Strength: Enterprise Products Partners (EPD) has increased its distribution for 27 consecutive years, with a yield exceeding 5.7%, and its strong balance sheet with around $3.3 billion in liquidity gives it the highest credit rating in the midstream energy sector, allowing it to capitalize on rising natural gas demand.
- Driving Natural Gas Demand: As AI data centers increase their electricity needs, natural gas emerges as the ideal fuel, with Chevron, Energy Transfer, and Enterprise Products Partners actively signing supply agreements to secure competitive advantages in the future market.
See More
Long-Term Investment Outlook for Energy Stocks
- Energy Transition Opportunities: With surging oil prices due to the war with Iran and the closure of the Strait of Hormuz, energy stocks have received a strong boost this year, particularly in the midstream sector where pipeline companies benefit from their fee-based models and are expected to see long-term growth.
- Growth Potential of Energy Transfer: Energy Transfer (ET) owns one of the largest midstream systems in the U.S., with a projected capital expenditure budget between $5.5 billion and $5.9 billion for 2023, and its strong position in the Permian Basin is expected to yield mid-teens returns.
- Stability of Enterprise Products Partners: Enterprise Products Partners (EPD) has increased its distribution for 27 consecutive years and is expected to generate $1 billion in free cash flow this year for debt repayment and stock buybacks, showcasing its robust performance in the midstream space.
- Growth Strategy of Williams Companies: Williams Companies (WMB) plans to invest $7 billion to $7.6 billion in growth projects in 2023, with a backlog of $15.5 billion in transmission projects and $9.6 billion in power solutions, aiming for over 20% return on invested capital and becoming a key energy supplier for AI data centers.
See More
Jefferies Upgrades Energy Transfer to Buy with $23 Price Target
- Rating Upgrade: Jefferies has upgraded Energy Transfer from Hold to Buy, raising the price target from $21 to $23, reflecting the company's ongoing success in natural gas and liquids, alongside potential benefits from rising commodity prices.
- Improved Fundamentals: Analyst Julien Dumoulin-Smith notes that Energy Transfer's fundamentals are stronger than when coverage began, driven by U.S. production trends and rising gas-oil ratios in the Permian, indicating enhanced competitive positioning.
- Project Acceleration: The company has sanctioned over $9 billion in projects since December 2024, which is expected to drive an EBITDA compound annual growth rate of approximately 4.8%, significantly above Wall Street consensus, highlighting the company's growth potential.
- Capital Expenditure Outlook: Energy Transfer anticipates $5 billion to $5.5 billion in annual growth capex through FY 2030, with the analyst suggesting that this forecast may underestimate the company's actual growth opportunities, further boosting investor confidence.
See More
