2 Cheap Energy Dividend Stocks With Growing Payouts, Led by Energy Transfer

Income investors don't have to choose between a high dividend yield and dividend growth. Because in the midstream energy sector, it's possible to get both, and often at valuations that remain well below the broader market.

Two of the best examples are Energy Transfer (NYSE: ET) and Enterprise Products Partners (NYSE: EPD). Both operate massive pipeline and energy infrastructure networks that generate largely fee-based cash flow, making them less dependent on daily swings in oil and natural gas prices than exploration and production companies. Moreover, both continue to increase their distributions while trading at relatively inexpensive valuations.

Energy Transfer

Energy Transfer stands out as one of the cheapest large-cap income stocks in the energy sector. The partnership currently yields about 6.7%, more than 6 times the S&P 500's dividend yield of roughly 1.05%, while still trading at a valuation below many of its large midstream peers.

Energy Transfer owns one of the largest energy infrastructure networks in North America, with more than 140,000 miles of pipelines transporting natural gas, crude oil, natural gas liquids, and refined products across 44 states. About 90% of the company's expected 2026 adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) is projected to come from fee-based earnings, with only limited exposure to commodity prices and marketing spreads.

The company has now increased its distribution for 18 consecutive quarters. It also continues targeting annual distribution growth of roughly 3% to 5% while investing heavily in new pipeline and export projects tied to growing natural gas demand, including demand from AI-powered data centers.

Enterprise Products Partners

If Energy Transfer offers the higher yield, Enterprise Products Partners offers exceptional consistency. Enterprise has increased its distribution for 28 consecutive years, one of the longest streaks in the entire energy industry. Its annualized distribution now stands at $2.24 per unit, producing a dividend yield of roughly 6%.

Despite its high-quality asset base and decades-long record of distribution growth, Enterprise continues to trade at a reasonable valuation relative to many large-cap infrastructure companies.

The business continues to execute at a high level, too. During the first quarter of 2026, adjusted EBITDA increased 10% to $2.7 billion, and operational distributable cash flow covered the quarterly distribution by 1.8 times.

That financial strength gives the company plenty of flexibility to fund expansion projects while continuing to raise distributions over time.

A long runway for growth

One reason these partnerships deserve a closer look is that they're not simply collecting fees from existing pipelines. They're also investing billions of dollars to expand the infrastructure needed to meet growing demand for natural gas, natural gas liquids, and exports.

The U.S. has become the world's largest exporter of liquefied natural gas, and several new export terminals are expected to come online over the next few years. Every additional export facility requires pipelines, storage terminals, fractionation plants, and other midstream infrastructure to move fuel from production basins to the Gulf Coast. That creates long-term growth opportunities for companies like Energy Transfer and Enterprise Products Partners.

Image source: Getty Images.

Artificial intelligence could provide another tailwind. In addition to solar and battery energy storage systems, many of the new data centers being built across the country are expected to rely heavily on natural gas-fired power plants. Meeting that demand will require additional pipeline capacity and related infrastructure, creating another potential source of long-term volume growth for both companies.

Neither partnership needs oil or natural gas prices to surge to benefit from these trends. As long as more energy moves through their systems, they collect more fees. That business model gives you exposure to growing North American energy demand without taking on the same commodity-price risk faced by exploration and production companies.

Income, stability, and value

Energy Transfer and Enterprise Products Partners both generate steady fee-based cash flow, offer dividend yields around 6% or higher, continue increasing those payouts, and still trade at valuations that look inexpensive compared with much of today's market. So if you're looking for a combination of income, stability, and value, these two midstream energy leaders remain among the most compelling options available today.

Jeff Siegel has no position in any of the stocks mentioned. The Motley Fool recommends Enterprise Products Partners. The Motley Fool has a disclosure policy.