Matt DiLallo, The Motley Fool

Fri, Jun 6, 2025, 3:08 AM5 min read

• Energy Transfer has a high-yielding distribution.

• The company has several expansion projects in its backlog that should fuel accelerating earnings growth in 2026 and 2027.

• It has many more projects under development to fuel future distribution growth.

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Energy Transfer (NYSE: ET) is known more for its lucrative cash distributions. The master limited partnership (MLP) currently yields around 7.5%. That's several times higher than the S&P 500, which has a dividend yield of less than 1.5%.

While income is a key draw of this MLP, it also has a compelling growth profile. It's currently working on several organic expansion projects that will drive accelerated earnings growth in 2026 and 2027. Meanwhile, it has a robust pipeline of future growth opportunities. Because of that, Energy Transfer should have plenty of fuel to continue growing its high-yielding distribution in the coming years.

Energy Transfer is on track to produce between $16.1 billion and $16.5 billion of adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) this year. That's about 5% higher than last year's total at the midpoint, a solid growth rate for a company offering such a high-yielding payout. However, it's down from the 13% growth rate it delivered last year, fueled mainly by acquisitions.

The energy midstream giant expects its growth rate to reaccelerate starting next year. Supporting that view is a large wave of organic expansion projects currently under construction. Energy Transfer is investing $5 billion into organic capital projects this year (up from $3 billion last year). These projects include several more natural gas processing plants, its Nederland Flexport NGL Expansion, and the Hugh Brinson Pipeline.

Many of the company's projects have in-service dates in the second half of this year and throughout the end of 2026. "As such, we continue to expect the majority of the earnings growth from these projects to significantly ramp up in 2026 and 2027," stated Co-CEO Tom Long on the company's first-quarter earnings conference call. As a result, its earnings growth rate could reaccelerate, especially once the first phase of its large-scale Hugh Brinson Pipeline comes online at the end of next year.

Energy Transfer has many more potential expansion projects under development. It has already sold out capacity for phase one of the Hugh Brinson Pipeline. It's currently negotiating with potential customers for well in excess of the capacity for phase two.