Energy Transfer (NYSE: ET) is better known for its hefty cash distributions. The master limited partnership's (MLP) payout currently yields around 8%. That's several times higher than the S&P 500 's 1.5% dividend yield.
That high-yielding dividend is only part of the appeal. The MLP is also growing at a brisk pace this year . Because of that, it could have the fuel to produce high-octane total returns .
Stomping on the gas
Energy Transfer recently reported robust second-quarter results. The midstream company generated nearly $3.8 billion of adjusted earnings before interest, taxes, depreciation, and amortization ( EBITDA ) in the period , a 20% surge, compared to the prior year. Meanwhile, its distributable cash flow rocketed 32% to over $2 billion.
The MLP delivered strong volumes across its operations, including record-setting results from the following categories:
- Crude oil transportation (up 23%)
- Natural gas liquids (NGL) exports (up 3%)
- NGL transportation volumes (up 4%)
- NGL and refined products terminal volumes (up 4%)
The company benefited from strong market conditions , recently completed expansion projects , and acquisitions. The midstream company closed its $1.5 billion Lotus Midstream acquisition in May 2023 and its $7.1 billion merger with Crestwood Equity Partners in November. It also completed its Bear processing plant last June and Frac VII in August of last year .
Energy Transfer generated enough cash to cover its distribution by nearly two times ($1.1 billion of distributions paid to investors in the period). That allowed it to retain all the money needed to fund its growth capital expenses ($549 million) with room to spare and gave it excess cash to help fund its $3.1 billion acquisition of WTG Midstream, which closed in July.
More growth is coming down the pipeline
The strong performance of Energy Transfer's base business and its recently closed acquisition of WTG Midstream gave it the confidence to boost its full-year growth outlook. The MLP now expects its adjusted EBITDA to be between $15.3 billion and $15.5 billion for the full year (up from its previous range of $15 billion-$15.3 billion). That's a 12% increase from last year's level at the midpoint.
The MLP also increased its growth capital spending outlook. It now expects to invest $3 billion-$3.2 billion on growth capital projects this year. That's an increase from its prior guidance for capital spending between $2.8 billion and $3 billion. Fueling that increase are growth capital projects related to its WTG Midstream acquisition and quicker return projects in its crude oil transportation and services segment related to its Crestwood merger.
Energy Transfer's backlog features growth capital projects scheduled to come online through the end of 2026. That provides the MLP with lots of visibility into its future growth and helps support its plan to increase its distribution by 3% to 5% per year .
Meanwhile, the company has several other projects under development that could further enhance its long-term growth outlook. These include its proposed Lake Charles LNG export project, Blue Marlin Offshore Port, blue ammonia hub, and carbon capture and sequestration projects.
Energy Transfer also has the financial flexibility to continue making acquisitions and other investments as opportunities arise. It recently closed its highly accretive acquisition of WTG Midstream.
In another accretive deal, the MLP formed a joint venture with Sunoco to combine their crude oil and produced water-gathering assets in the Permian Basin. These moves continue the MLP's strategy of being a leading consolidator in the midstream sector.
Income and growth
Energy Transfer is growing briskly these days. The MLP has made several needle-moving acquisitions, which, along with organic expansions, will keep it on track to deliver high-octane growth in the coming quarters.
That should give it the fuel to continue increasing its high-yielding distribution. These factors make it a compelling option for those seeking growth and income.
Matt DiLallo has positions in Energy Transfer. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy .
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