Energy Transfer's 6.5% Yield Supported by Strong Fundamentals
Energy Transfer, one of the largest midstream pipeline companies in the US, pays a forward yield of 6.5%, which might seem high but is supported by plenty of cash and long-term catalysts.
The company operates over 140,000 miles of pipeline across 44 states, transporting various energy products like natural gas, liquefied natural gas (LNG), crude oil, and refined products.
Energy Transfer generates revenue by charging 'tolls' to upstream producers and downstream refineries for using its infrastructure. This business model is insulated from volatile commodity prices since it only needs resources flowing through its pipes to generate income.
The company's distributable cash flow (DCF) has consistently covered its total distributions, even during challenging market conditions like the pandemic, inflation, soaring interest rates, and geopolitical conflicts.