Want $1,000 in Annual Passive Income? Invest $14,000 in This High-Yielding Energy Stock Right Now.
Key Points
Energy Transfer operates in the midstream sector of the energy industry.
The company is a limited partnership, so it passes profits and losses onto investors.
- 10 stocks we like better than Energy Transfer ›
There are many forms of passive income, but the main one for stock investors is dividends. It's a way for investors to be rewarded simply for holding a stock. The amount that stocks pay out varies widely, but if you're looking for a high-yield option, it's worth considering Energy Transfer (NYSE: ET).
At the time of writing, Energy Transfer's distribution yield is 7.1%, with an average of 7.4% over the past five years. Yields fluctuate as stock prices change, but if you invested $14,000 in Energy Transfer and it averaged a yield of just over 7.14%, it would pay out $1,000 annually. If it continued its five-year average, you would only need to invest around $13,514.
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The company operates in the midstream sector of the energy industry, helping transport crude oil, gas, and natural gas liquids. It currently has over 140,000 miles of energy infrastructure and pipelines, one of the largest networks in the country.
This won't be a high-flying growth stock in most cases, but its dividend is among the more attractive on the market. It makes money by charging fees (based on volume) to energy production companies that need to use its infrastructure to move product.
It's not structured like a typical company; it's a limited partnership (LP), meaning it passes profits and losses on to investors, which is how it has maintained its high dividend payout. You'll need to handle an extra tax step when dealing with an LP -- like filing a schedule K-1 form -- but Energy Transfer can be a good income addition to your portfolio.
Should you buy stock in Energy Transfer right now?
Before you buy stock in Energy Transfer, consider this:
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Stefon Walters has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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