Energy Transfer Just Can't Stop Adding Fuel to its Growth Engine

Energy Transfer (NYSE: ET) has a high dividend yield (currently over 7%). A company usually has a high dividend yield because it lacks attractive investment opportunities.

However, that couldn't be further from the truth with this master limited partnership (MLP). The MLP can't seem to stop securing additional expansion projects. That's giving it lots of fuel to grow its earnings and high-yielding payout. As a result, the pipeline stock could produce robust total returns in the coming years.

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Adding more projects to the list

Energy Transfer and its joint venture partner Kinder Morgan recently approved two expansion projects on their Florida Gas Transmission (FGT) pipeline to support growing demand across Florida:

• FGT Phase IX Project: The companies will build up to 82 miles of looping pipeline and new and upgraded compression facilities, which they expect to complete in the fourth quarter of 2028.
• South Florida Project: The partners will build a new 37-mile lateral and related facilities to enhance system reliability and efficiency in South Florida, with completion expected in the first quarter of 2030.

Energy Transfer will invest $535 million into FGT Phase IX and another $110 million into the South Florida Project, while its partner will fund up to $700 million of the capital costs. These expansion projects enhance their growth visibility and extend it into the early part of the next decade.

The building boom

Energy Transfer currently expects to invest between $5 billion and $5.5 billion into growth capital projects this year. This capital spending will support projects entering commercial service over the next several years. Notable 2026 project completions including Phase I of its $2.7 billion Hugh Brinson natural gas pipeline, its Mustang Draw I & II gas processing plants, and pipeline projects to supply gas to power plants and data centers. Meanwhile, the company has several longer-term capital projects underway, led by the $5.6 billion Transwestern Pipeline expansion project (with an anticipated in-service date in the fourth quarter of 2029).

The MLP has more projects under development. For example, it aims to approve the Dakota Access North Project to increase the flow of Canadian crude oil into the U.S. by the middle of this year. It's also working on several additional projects to supply gas to additional data centers and gas-fired power generation facilities. The company has so many expansion projects these days that it decided to suspend further development of its Lake Charles LNG export project to focus on investing in gas pipeline infrastructure with better risk/return profiles.

Energy Transfer's abundance of growth projects is helping fuel accelerated earnings growth this year. The company expects to grow its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) by 9% to 12% this year, up from 3% growth last year. Given the size of its backlog, it should continue to grow briskly. That supports its plans to increase its high-yielding distribution by 3% to 5% each year.

High-octane total return potential

Energy Transfer's growing list of expansion projects is adding more fuel to its earnings and distribution growth engines. This combination of income and growth could give the company the fuel to produce robust total returns in 2026 and beyond, making it a compelling long-term investment opportunity.

Matt DiLallo has positions in Energy Transfer and Kinder Morgan. The Motley Fool has positions in and recommends Kinder Morgan. The Motley Fool has a disclosure policy.