Is Energy Transfer Stock a Millionaire Maker?

3 weeks ago 9

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Leo Sun, The Motley Fool

Wed, Mar 26, 2025, 3:53 AM 4 min read

Energy Transfer (NYSE: ET), 1 of the largest midstream companies successful the U.S. with implicit 125,000 miles of pipeline crossed 44 states, went nationalist astatine a split-adjusted terms of $5.50 per portion connected Feb. 3, 2006. A $10,000 concern successful that maestro constricted concern (MLP) would beryllium worthy $36,150 contiguous and paying retired $2,527 successful yearly dividends connected a quarterly basis. If you had reinvested those dividends, your concern would beryllium worthy $123,000 and paying retired astir $8,600 successful yearly dividends.

That's a decent 19-year gain, but the aforesaid $10,000 concern successful an S&P 500 scale money (without reinvested dividends) would beryllium worthy $45,560 today. Energy Transfer wouldn't person made you a millionaire unless you had invested much than $100,000 successful its IPO.

Natural state pipelines with the prima mounting successful the background.

But could Energy Transfer make millionaire-maker gains arsenic rising vigor costs thrust much states to enactment the operation of caller earthy state pipelines? Let's reappraisal its concern model, maturation rates, and valuations to find out.

As a midstream company, Energy Transfer provides pipeline, storage, and terminalizing services for earthy gas, earthy state liquids (NGLs), crude oil, and refined products. By gathering those pipelines, it acts arsenic a "toll roadworthy operator" for a wide scope of upstream accumulation and downstream depletion companies.

Energy Transfer has expanded rapidly done acquisitions since its nationalist debut. It acquired Sunoco and Southern Union Company successful 2012, Susser Holdings successful 2014, Regency Energy Partners successful 2015, its ain spouse Energy Transfer Partners successful 2018, SemGroup successful 2019, and Crestwood Equity Partners successful 2023.

It's besides investing a batch of currency into its existing pipelines. For 2025, it expects its maturation superior expenditures to emergence 69% to astir $5 cardinal arsenic it aggressively expands its operations successful the Permian Basin and different regions.

But arsenic Energy Transfer expanded, it faced mounting absorption from authorities regulators, Native American tribes, and biology organizations similar Greenpeace USA implicit information and territorial concerns. The Dakota Access Pipeline, which it owns a 38.2% involvement in, was a large flashpoint for galore of those conflicts passim its operation from 2016 and 2017.

From 2014 to 2024, Energy Transfer's gross grew astatine a compound yearly maturation complaint (CAGR) of 4% arsenic its net per portion (EPU) roseate astatine a CAGR of 8%. As an MLP, Energy Transfer pays retired astir of its net per portion arsenic dividends to its investors.

Energy Transfer spent astir 100% of its EPU connected its dividends implicit the past 12 months. It's besides raised its dividend annually for 12 consecutive years, and it pays a guardant output of astir 7% -- which is overmuch higher than the 10-year Treasury's 4.3% yield.