This 7.8%-Yielding Stock Is Poised for Accelerating Growth

Like most stocks, Energy Transfer LP (NYSE: ET) has been quite volatile so far in 2025. However, nervous investors received great news from the midstream energy company on Tuesday.

Energy Transfer's unit price popped following its first-quarter update. But the Q1 numbers weren't the main story. This 7.8%-yielding stock is poised for accelerating growth.

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A solid Q1

Energy Transfer announced net income for the first quarter of $1.32 billion, or $0.36 per diluted unit. This result reflected year-over-year growth of roughly 6.5%. It also beat the consensus analysts' earnings estimate of $0.33 per unit.

The limited partnership (LP) also reported volume growth across the board. Interstate natural gas transportation volumes rose 3% year over year to a record high. Crude oil volumes soared 10%. Natural gas liquids (NGLs) volumes increased 4%. NGL exports jumped 5%. Terminal volumes for NGLs and refined products were up 4%. Midstream gathered volumes were more than 2% higher than in the prior-year period.

Granted, there were a few not-as-rosy parts of Energy Transfer's update. The midstream energy leader's revenue slipped 2.8% year over year to $21 billion. Distributable cash flow also fell from $2.36 billion in Q1 of 2024 to $2.31 billion in the recent quarter.

CEO Marshall "Mackie" McCrea also acknowledged in the Q1 earnings call that Energy Transfer has seen "a slowdown a little bit over the last few weeks." He added that management foresees "some potential challenges over the next quarter or two."

Image source: Getty Images.

A "barn burner" on the way

Any industry softness should be only temporary, though. McCrea said, "But, a year, two years through 10 years, we're extremely bullish on our industry and on the need for all the products that we transport." He explained, "This is what happens in this industry. It will slow down, and then it will come back as a barn burner. We certainly anticipate that happening with oil but even ten-fold on gas."

International demand for butane, ethane, and propane is a bright spot for Energy Transfer. China is a major customer, but not the only one. McCrea stated, "[W]e really don't expect to see any major challenges, if any challenges at all, selling out our terminal every month, the rest of this year."

Data centers have also become such an important growth market that McCrea used the term "gold rush." In February 2025, Energy Transfer announced a long-term agreement to provide natural gas for CloudBurst's artificial intelligence-focused data center development in Central Texas. McCrea revealed in the Q1 earnings call that the LP is exploring additional opportunities with around 150 data centers in Texas alone, plus more in other states. He hinted, "[W]e expect to make some significant announcements in the next four to eight weeks."

There's also increasing demand for natural gas in Texas because of the state's growing population. McCrea stated enthusiastically, "[W]e're excited about the revenue that we're about to bring in the door."

His company has made the investments required to achieve this growth, too. Energy Transfer plans to spend around $5 billion on organic growth capital projects this year. Most of these projects should come online in 2025 or 2026.

Everything an income investor could want

I think Energy Transfer offers pretty much everything an income investor could want. As previously mentioned, its forward distribution yield is a juicy 7.8%. The LP increased the distribution by more than 3% last month.

The LP's business model is resilient. Energy Transfer's cash flows are primarily fee-based. It has limited exposure to commodity prices. CFO Tom Long said in the Q1 call that the company's balance sheet is the strongest in its history.

Energy Transfer's volatility in 2025 has been overdone, in my view. With its attractive distribution and likelihood of accelerating growth, this stock looks like an ideal pick to buy on the dip.

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