All It Takes Is $5,000 in Energy Transfer (ET) to Generate Hundreds in Annual Passive Income

Source Motley_fool

Key Points

  • Energy Transfer pays a hefty 6.8% yield.

  • Its pipelines generate plenty of cash to cover those tax-efficient distributions.

  • 10 stocks we like better than Energy Transfer ›

Energy Transfer (NYSE: ET), one of the largest midstream companies in the U.S., operates more than 140,000 miles of pipeline across 44 states. It delivers crude oil, natural gas, natural gas liquids (NGL), and other refined products through its pipelines, and it exports liquefied natural gas (LNG) to overseas markets via its marine export terminals.

As a midstream company, Energy Transfer is well-insulated from volatile commodity prices because it merely charges other companies "tolls" to use its infrastructure. As a master limited partnership (MLP), it blends a return of capital with its own cash to pay tax-efficient distributions.

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Pipelines on a stock chart.

Image source: Getty Images.

Why is Energy Transfer a great income stock?

Energy Transfer's business is built to generate stable cash and income for long-term investors. It pays a forward yield of 6.8%, which is easily sustainable because it spends only about half of its distributable cash flow (DCF) on distributions each year.

A $5,000 investment in Energy Transfer today will yield about $335 per year in annual income. Reinvesting those dividends will create even bigger compound returns.

Energy Transfer trades at just 12 times this year's earnings per unit (EPU), and it's well-positioned to capitalize on the data center boom (which relies on natural gas for 40% of its electricity in the U.S.) since it transports 30% of the country's natural gas. Therefore, this income-generating pipeline play is still a solid long-term investment.

Should you buy stock in Energy Transfer right now?

Before you buy stock in Energy Transfer, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Energy Transfer wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $373,352!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,406,241!*

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*Stock Advisor returns as of September 29, 2026.

Leo Sun has positions in Energy Transfer. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Disclaimer: For information purposes only. Past performance is not indicative of future results.
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