The Best Pipeline Stock to Invest $2,000 in Right Now

Core Viewpoint - The pipeline master limited partnerships (MLPs) sector is experiencing strong performance, with the Alerian MLP Infrastructure Index showing a total return of 26.7% in 2024 and nearly 10% year-to-date [1] Industry Summary - The MLP pipeline sector is attracting investor interest due to strong distribution payments, robust yields, historically low valuations, and increasing growth opportunities driven by rising natural gas demand [2] - Energy Transfer is highlighted as a solid investment option within this sector, particularly for investors looking to invest a few thousand dollars [2] Company Summary - Energy Transfer operates one of the largest integrated midstream systems in the U.S., focusing on the transportation, storage, and processing of hydrocarbons, with a strategic position in the Permian Basin, known for its favorable drilling economics [3] - The company is well-positioned to benefit from growing energy needs related to artificial intelligence and natural gas exports, with access to low-cost natural gas [4] - Energy Transfer plans to increase its growth capital expenditure (capex) to $5 billion in 2025, up from$3 billion in the previous year, focusing on projects in the Permian region [5] - The company has signed an agreement to supply natural gas to data center developer CloudBurst and has received requests to connect to approximately 70 data centers across 12 states [6] - Energy Transfer anticipates mid-teens returns on its growth projects, with a significant impact on earnings before interest, taxes, depreciation, and amortization (EBITDA) expected in 2026 and 2027 [7] - The company increased its distribution by 3.2% year-over-year to $0.325, resulting in a forward yield of about 6.5$1.98 billion last quarter, with a distribution coverage ratio of 1.8 [9] - With the increase in capex to $5 billion, Energy Transfer is projected to pay out around$4.5 billion in distributions, which should be covered by its growing DCF [10] - Despite strong performance and growth opportunities, Energy Transfer trades at a relative and historical discount, with an enterprise value (EV) to EBITDA multiple of 8.5 based on 2025 estimates [11][12] - The stock is trading below pre-pandemic levels, where it often had an EV/EBITDA multiple above 15, and the midstream MLP group averaged 13.7 between 2011 and 2016 [13] - Overall, Energy Transfer is considered an inexpensive stock with attractive yield and growth potential, making it a suitable option for investors entering the sector [14]