Energy Transfer's 7% yield rebounds after 2020 payout cuts

Energy Transfer (ET) has rebuilt its investor payouts after a sharp cut in 2020. The company now offers a 7% distribution yield, higher than before the pandemic downturn. Its steady growth in recent years has also pushed its stock market value to around $60 billion by early 2026.

The energy downturn in 2020 forced Energy Transfer to halve its distribution. The move came as COVID-19 slashed demand, leaving some investors wary of future stability. Since then, the company has not only restored but increased its payouts.

Quarterly distributions have risen every three months for the past four years. The company's cash flow from natural gas and energy infrastructure has strengthened, lifting its stock market today capitalisation from about $25 billion in early 2021 to roughly $60 billion today. Current distributable income now covers payouts by 1.8 times.

Looking ahead, Energy Transfer aims for modest annual growth of 3% to 5% in distributions. While its yield remains high, some conservative investors may still question the reliability after the 2020 cut. Competitors like Enterprise Products Partners (EPD) offer a 6% yield with a longer track record of 27 straight annual increases.

Energy Transfer's distribution now exceeds pre-pandemic levels, backed by stronger cash flows and a larger stock market presence. The company's plan for gradual increases suggests confidence in its financial position. Yet, its past cut and higher yield may still give cautious investors pause.