Why I Wouldn't Touch This 6.5% Yielder, Even at a Discount

2 months ago 32

Reuben Gregg Brewer, The Motley Fool

Sun, July 26, 2026 astatine 9:35 AM CDT 3 min read

Energy Transfer (NYSE: ET) has a lofty 6.5% organisation yield. That's really higher than peers similar Enterprise Products Partners (NYSE: EPD) and Enbridge (NYSE: ENB) that connection 5.6% and 5%, respectively. Even though Energy Transfer trades astatine a discount to these peers, I wouldn't bargain it. Here's why.

Energy Transfer is much analyzable

Enterprise Products Partners is simply a precise straightforward business, operating a portfolio of midstream vigor assets. It charges customers fees for the usage of its assets, generating reliable currency flows to enactment its yield. Enbridge, which I own, is simply a small much complex. It owns midstream assets, regulated earthy state utilities, and renewable powerfulness assets. However, each of these businesses are reasonably elemental to recognize and make reliable currency flows to enactment the company's charismatic yield.

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A enactment of caution constabulary tape.

Energy Transfer owns midstream assets and besides serves arsenic the managing spouse for 2 publically traded maestro constricted partnerships (MLPs), Sunoco (NYSE: SUN) and USA Compression Partners (NYSE: USAC). So determination are truly 3 antithetic businesses successful the premix for investors to monitor. I don't spot the request to instrumentality connected the other complexity, particularly erstwhile Energy Transfer has done things that permission maine with spot issues.

Energy Transfer: Trust is the linchpin contented

If the complexity of Energy Transfer's concern isn't capable to support you away, past see 2 much facts. In 2006, Energy Transfer agreed to bargain adjacent Williams (NYSE: WMB). It got acold feet and, successful its effort to scuttle the deal, issued convertibles that appeared to support the CEO from a dividend cut. The merger was called off, and the feared dividend chopped didn't happen, but that determination leaves maine with a large question people astir the MLP's committedness to unitholders.

Then determination was the 50% organisation chopped successful 2020, during the vigor downturn that accompanied the COVID pandemic. The determination was made to absorption connected indebtedness reduction, and the organisation is increasing again. But if you were counting connected those distributions to wage your surviving expenses, you got a rude awakening close erstwhile you astir apt needed those distributions most. Neither Enterprise nor Enbridge chopped their disbursements, with Enterprise expanding its organisation for 27 consecutive years and Enbridge expanding its dividend for 31 years.

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