ET Stock: Is Energy Transfer a Buy? | Midstream Tollbooth

Energy Transfer operates one of the most diversified midstream networks in North America — 125,000+ miles of pipelines spanning natural gas, NGL, crude, and refined products — with a 7%+ yield that reflects the company's history of aggressive growth and investor skepticism.

Last updated: 2026-02-02 · Data: Yahoo Finance, SEC filings, company investor presentations

The Business

Energy Transfer owns one of North America's largest midstream energy networks — 130,000 miles of natural gas, oil, and NGL pipelines spanning from the Permian Basin to the Gulf Coast and beyond. Think of ET as the interstate highway system for American energy: crude oil, natural gas, and natural gas liquids flow through their steel arteries every day, generating fee-based revenue regardless of commodity prices.

The company operates across the entire midstream value chain. Their interstate natural gas pipelines move 40% of all gas consumed in the United States. Their crude oil network includes major arteries like the Dakota Access Pipeline. And their NGL infrastructure captures, processes, and transports the valuable liquids that come with shale gas production. Unlike upstream producers who bet on commodity prices, ET gets paid for providing the plumbing — a classic tollbooth model where volume matters more than price.

This isn't just pipes in the ground. ET owns processing plants, storage facilities, marine terminals, and even retail operations. When a driller in the Permian needs to get crude to Cushing, or when a petrochemical plant in Louisiana needs ethane feedstock, they pay ET for access to infrastructure that took decades and billions of dollars to build.

By the Numbers

The Tollbooth Thesis

Energy Transfer sits at the epicenter of three unstoppable trends reshaping American energy infrastructure. First, U.S. LNG exports are exploding. The company's Lake Charles LNG facility came online in 2022, with additional trains under construction. As global demand for American gas surges — driven by Europe's pivot away from Russian energy and Asia's coal-to-gas transition — ET's Gulf Coast export infrastructure becomes increasingly valuable. Every molecule of gas exported generates pipeline fees, storage revenue, and processing margins.

Second, the Permian Basin continues its relentless growth, requiring massive midstream investment. ET's integrated network connecting West Texas to Gulf Coast refineries and export terminals creates a natural monopoly for moving Permian crude and gas. The company has invested billions in expanding pipeline capacity, with projects like the Permian Express and additional Dakota Access capacity driving fee-based growth for years to come.

Third, the petrochemical boom along the Gulf Coast creates sustained demand for NGL infrastructure. As chemical companies build world-scale crackers to convert cheap American ethane into plastics, ET's NGL processing and fractionation assets generate steady tolls. The company's Mont Belvieu complex — the heart of America's NGL trading hub — benefits from both domestic petrochemical demand and growing international NGL exports.

The Risks

• Regulatory overhang: Pipeline projects face increasingly complex permitting and legal challenges, potentially delaying or killing high-return expansion projects

• Volume sensitivity: Despite fee-based contracts, prolonged production declines in key basins would pressure cash flows and growth capital

• Leverage concerns: The 1.36 debt-to-equity ratio limits financial flexibility, especially if interest rates remain elevated

• ESG pressure: Environmental opposition to fossil fuel infrastructure could impact project approvals and access to capital

• Distribution coverage: The 104% payout ratio leaves little cushion if cash flows disappoint

Income Angle

ET's 7.15% distribution yield reflects both the company's generous payout policy and market skepticism about sustainability. The distribution has remained stable since 2018 following a painful cut during the last energy downturn. Management targets distribution coverage of 1.4x-1.6x, though current coverage sits closer to 1.0x, requiring careful monitoring.

The key attraction here is inflation protection combined with long-term growth potential. Most of ET's contracts include inflation escalators, providing natural hedging against rising costs. As U.S. energy exports grow and domestic midstream infrastructure ages, replacement cost inflation should drive higher tolls over time. For income-focused investors, ET offers exposure to critical infrastructure with yields that dwarf traditional utilities, albeit with higher volatility and execution risk.

The Bottom Line

Energy Transfer owns irreplaceable energy infrastructure that will generate cash flows for decades. The 7.15% yield compensates investors for legitimate risks around leverage and distribution coverage, but the underlying business benefits from America's emergence as a global energy superpower. This is a tollbooth worth owning for investors comfortable with midstream complexity and willing to monitor distribution coverage closely.

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Frequently Asked Questions

Is Energy Transfer (ET) a good dividend investment?

ET offers one of the highest yields in midstream at 7-8%, but the distribution was cut in 2020 (the first time in the company's history). It has since been restored and increased. The high yield compensates for governance concerns and the company's aggressive M&A history. It's best for income investors who prioritize yield over management quality.

How large is Energy Transfer's pipeline network?

ET operates over 125,000 miles of pipelines across 44 states, handling natural gas, NGLs, crude oil, and refined products. This makes it one of the most diversified midstream companies, with exposure to nearly every major U.S. production basin and demand center. Scale provides both revenue diversification and operating leverage.

How does Energy Transfer benefit from LNG exports?

ET's pipeline network feeds multiple Gulf Coast LNG export terminals, and the company has proposed its own Lake Charles LNG project. Growing U.S. LNG exports drive higher gas throughput on ET's gathering and transmission systems, directly increasing fee-based revenue. The company's Texas-to-Gulf Coast infrastructure is particularly well-positioned.

What are Energy Transfer's risks?

Governance and management credibility concerns persist from past distribution cuts and aggressive M&A. Regulatory risk on pipeline permits, high leverage relative to peers, and the MLP structure's K-1 tax complexity are additional headwinds. The company's founder and CEO Kelcy Warren's concentrated control also raises corporate governance questions.

This analysis is part of Energy Macro's Tollbooth Royalties research. For our complete infrastructure income framework, see The Blackout Fortune Playbook.

Last updated: February 1, 2026 | Data: Yahoo Finance, SEC filings, company investor presentations