Energy Transfer and Chevron Lead Energy Sector Growth with Steady Dividends

The energy sector has seen significant growth this year, with S&P 500 energy companies collectively up 32.7% as of August. Among the top performers are Energy Transfer and Chevron, both known for their dividend payments.

Energy Transfer operates a network of pipelines that transport crude oil and natural gas, generating revenue through volume-based fees. With over 140,000 miles of infrastructure in place, the company has relatively low ongoing expenses, making its business model lucrative. Its current yield is 6.5%, significantly higher than what investors can expect from an S&P 500 ETF.

Energy Transfer's recent increase in cash distributions marks the 19th consecutive quarter. As a master limited partnership, investors will receive a Schedule K-1 form to file during tax time, but this does not complicate the process. The company's stability and consistent cash flow make it an attractive option for those seeking steady income.

Chevron, on the other hand, is a fully integrated energy company with operations in every stage of the pipeline. Its recent net income increase of nearly 385% year over year to $12.1 billion is largely due to the conflict in the Middle East and surge in global energy prices. However, investors do not have to question Chevron's ability to maintain its dividend, given its $15.4 billion in adjusted free cash flow handily covered the $3.5 billion paid out in dividends.