Energy Transfer Shows Strong Market Performance

Energy Transfer, a major midstream company in the U.S., is often seen as a stable investment, not necessarily one that outshines market performance. However, since January, its stock has increased by 17%, surpassing the S&P 500’s 9% gain. Let’s explore what led to this outperformance and whether it can sustain this growth into the latter half of 2026.

What’s Driving Energy Transfer’s Success?

Energy Transfer manages over 140,000 miles of pipeline across 44 states, transporting a variety of products like natural gas, LNG, NGL, and crude oil. Unlike many oil stocks, this company isn’t heavily impacted by fluctuations in commodity prices. It operates on a fee-based model, charging companies for pipeline use. So, as long as oil and gas keep flowing, there’s a consistent source of cash for dividends.

Interestingly, in the first quarter of 2026, Energy Transfer saw record levels of crude oil and NGL volumes driven by a spike in demand. It also established significant long-term contracts with both power companies and data centers, aiming to supply natural gas for the rapidly growing AI sector. This shift could redefine it from a steady revenue provider into a higher-growth stock linked to AI infrastructure.

Continued Market Outperformance

In its first-quarter predictions, Energy Transfer estimated that its adjusted EBITDA would grow between 14% and 16% in 2026, up from earlier projections of 9% to 12%. This is a noteworthy increase compared to a mere 3% growth in 2025.

Valued at approximately $135.3 billion, Energy Transfer’s shares are trading at just 7 times this year’s adjusted EBITDA and offer a generous forward yield of 6.9%. As investor perspectives shift toward recognizing its role in the AI infrastructure space, the stock could gain further traction, outpacing the S&P 500 even more.

Moreover, for those focused on income, Energy Transfer appears to be a reliable choice. Its projected adjusted distributable cash flow for 2025 stands at $8.2 billion, comfortably covering the total distribution of $4.6 billion, leaving ample room for hikes in the future. It also adeptly blends capital gains with income, providing tax-efficient distributions.

However, it’s essential to note that Energy Transfer is structured as a master limited partnership (MLP), so it’s treated as a partner for tax purposes, requiring income to be reported on a K-1 form. If you can navigate that, Energy Transfer might be a worthwhile blend of growth and income in the coming years.

Should You Invest in Energy Transfer Now?

Before deciding to buy Energy Transfer stock, keep these points in mind:

The Motley Fool’s analyst team highlights other stocks that may be better suited for long-term growth, and Energy Transfer hasn’t made that list. Their top 10 picks are poised for impressive returns in the coming years.

If you want to know when it’s time to invest, consider past performance examples like Netflix or Nvidia. Both stocks have shown remarkable growth since their recommendations, attracting significant attention from investors.

In the end, recent performance can certainly draw interest—stocks noted for outperforming the S&P 500 by a significant margin often have compelling reasons for that track record. That said, weigh your options carefully in choosing where to put your money.