If you’re on the hunt for stocks that offer high yields along with promising growth potential, you might want to check out Energy Transfer (NYSE: ET). The stock is currently at 20% of its recent peak, making this an opportune time to invest.
According to sources, the company operates one of the largest integrated pipeline and midstream systems in the nation, primarily focusing on natural gas but also dealing with crude oil, natural gas liquids (NGL), and refined products like gasoline.
Energy Transfer is strategically located in Texas, particularly around the Permian Basin and Gulf Coast, allowing it to access inexpensive natural gas and critical storage and transportation hubs. It’s also looking to benefit from developments in artificial intelligence (AI).
Interestingly, AI infrastructure demands significant energy, prompting companies to seek out cheaper energy sources for new data centers. This has led to a surge of AI data centers being established in Texas and the surrounding areas, where the Permian Basin serves as a cost-effective source of natural gas that drillers often need to dispose of.
With one of the region’s largest natural gas gathering and processing systems, Energy Transfer can supply affordable natural gas to data centers and utilities. This positions the company well to pursue attractive growth opportunities.
One key project is the Hugh Brinson Pipeline, transporting natural gas from the Permian to various Texas markets. Energy Transfer considers this pipeline as potentially its most valuable asset, highlighting its significance for a company of this scale. Additionally, the Desert Southwest Pipeline is under construction to deliver natural gas to Arizona and New Mexico, along with several partnerships with data center operators like Oracle and Fermi.
For this year and next, Energy Transfer is expecting to invest nearly $10 billion in growth capital expenditures with projected returns in the mid-teens. These ventures could potentially drive approximately $1.5 billion in adjusted EBITDA when fully operational.
Investors can look forward to a quarterly distribution of $0.3325 per unit, translating to a forward yield of 7.9%. This distribution is fully backed by Energy Transfer’s cash flow, which strengthened to 1.7 times last quarter, marking the company’s best financial position to date.
Notably, around 90% of the company’s EBITDA is derived from fee-based sources, insulating it from fluctuations in commodity prices. The company recently reported its highest share of take-or-pay contracts, ensuring steady cash flow and stable distributions. There are plans to increase dividends by 3% to 5% annually.
Besides its attractive yield and growth prospects, the stock’s valuation appears favorable. The current enterprise value (EV) to EBITDA multiple stands at just 7.6 times the anticipated $17.2 billion adjusted EBITDA for 2026, significantly lower than the historical multiple of 13.7 for pipeline MLPs between 2011 and 2016, despite improvements in both the group and Energy Transfer’s balance sheets.
With the stock down 20% from its high, it seems like a fitting moment to seize the opportunity to invest as growth avenues widen.
However, before investing in Energy Transfer stock, it’s wise to keep in mind the following:
Our analysts have recognized other stocks with significant return potential over the coming years, and Energy Transfer didn’t make that specific list.
When looking at historic returns, for example, investing in Netflix or Nvidia has proven highly lucrative for early investors.
It’s important to note that the average return from our stock advisor program has outperformed the S&P 500 significantly.
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Recent returns as of December 8, 2025.
Disclosure: I hold a position in Energy Transfer.
1 Epic High-Yield Pipeline Stocks Drop 20%, Buy Forever Originally published.
