Energy Transfer: The Dividend Stock with an 8% Yield Worth Having

Stock price fluctuations in 2025 might offer investors a good buying opportunity.

The attractive 8% dividend yield is not only appealing but also sustainable.

New projects could serve as a catalyst for long-term growth.

While the group shows positive profits, energy is one of the seven sectors lagging behind in the global S&P 500 this year, with some stocks taking bigger hits than others.

Take midstream operators like Energy Transfer, for instance. Currently, its stock is down nearly 17% since the start of the year, and such a drop can sometimes attract attention. The dividend yield is around 8%, and this combination of a price drop and a robust yield, especially while the overall market thrives, might entice some investors. Still, I wonder if it’s a yield trap, but I’m not entirely convinced.

Recently, the company announced it would cancel the challenging Lake Charles liquefied natural gas (LNG) project. This might free up resources for the anticipated Desert Southwest expansion project.

Additionally, the company maintains stable adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) and is focused on growth while managing its debt wisely.

Maintaining a net debt-to-EBITDA ratio of 4 to 4.5 is crucial for pipeline operators to stay competitive and protect their investment-grade credit ratings. This dividend is also backed by expectations that Energy Transfer’s long-term finances could improve with new projects, potentially enhancing free cash flow.

Looking ahead, there’s a possibility not everyone realizes that Energy Transfer is connected to the rising demand for data centers. The Desert Southwest expansion aims to address additional customer needs, which may involve data centers.

When discussing data centers, two points stand out. First, major companies prefer to source natural gas from regional projects before it’s released to the broader market. Secondly, Texas, a key area for gas reserves, is also becoming a data center hub. Given that Energy Transfer operates as the largest intrastate pipeline in Texas, it seems reasonable to think that it could benefit from the surge in demand driven by data centers.

Before making an investment in Energy Transfer, it’s worth considering a few factors.