Attention, Income Investors: It's Time to Load Up on Energy Transfer Stock
Key Points
Energy Transfer's ultra-high-yield distribution continues to grow.
The company's business remains strong.
More growth should be on the way.
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When a company badly misses Wall Street's earnings estimates, its stock usually takes a beating. But that didn't happen with Energy Transfer LP (NYSE: ET) after the midstream energy leader announced its 2025 fourth-quarter results on Tuesday morning.
Energy Transfer reported Q4 earnings per share of $0.25, well below the consensus estimate of $0.36 among analysts surveyed by S&P Global (NYSE: SPGI). However, the unit price of the master limited partnership (MLP) stock closed down on Tuesday less than 1%.
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How did Energy Transfer seemingly defy gravity? The company's overall story was better than its Q4 earnings snapshot indicates. I think this stock's strength underscores something important for income investors: It's time to load up on Energy Transfer. Here are three reasons why.
Image source: Getty Images.
1. A growing distribution
What's the most compelling argument for why income investors should buy Energy Transfer stock? Its distribution.
Energy Transfer's distribution yield already stands at a mouth-watering 7.2%. Even better, the distribution continues to grow.
In January, the company announced a distribution increase of more than 3% year over year. Co-CEO Thomas Long also said during Energy Transfer's Q4 earnings call something that should be music to income investors' ears: "We continue to target a long-term annual distribution growth rate of 3% to 5%."
2. A strong underlying business
Energy Transfer's Q4 earnings miss doesn't reflect a struggling business. Actually, the company's underlying business is quite strong.
Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) last year totaled $16 billion, setting a record for the partnership. Energy Transfer also increased its guidance for 2026. It now expects adjusted EBITDA of between $17.45 billion and $17.85 billion, up from the previous range of $17.3 billion to $17.7 billion. This upward revision was due to USA Compression's (NYSE: USAC) acquisition of J-W Power Company in January. Energy Transfer owns a controlling interest in USA Compression.
The midstream company set new partnership records in Q4 for natural gas liquids (NGL) fractionation volumes and crude oil transportation volumes. Volumes in other areas of the business also increased across the board, with NGL and refined product terminals volume jumping 12% year over year.
3. More growth on the way
Energy Transfer is poised to deliver more growth this year. The ramp of its Flexport NGL export project and new Permian Basin processing plants should be key growth drivers.
The company is also leading the industry in landing deals with data centers, including a significant contract with Oracle (NYSE: ORCL). However, Energy Transfer's growth isn't limited to data centers. Co-CEO Marshall "Mackie" McRea said in the Q4 call that population growth and manufacturing expansion are also important factors behind the company's growth.
It's a stretch to say that Energy Transfer is a growth stock in the same category as some high-flying stocks. However, for income investors, the growth that this midstream company is likely to deliver should be attractive.
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Keith Speights has positions in Energy Transfer. The Motley Fool has positions in and recommends Oracle and S&P Global. The Motley Fool has a disclosure policy.
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