Should You Buy Energy Transfer or This High-Yield Alternative?

Core Viewpoint - Energy Transfer (ET) offers an attractive yield of approximately 7.6%, significantly higher than the broader market's yield of 1.3% and the average energy stock's yield of around 3% [1] Company Overview - Energy Transfer operates as a midstream business, owning energy infrastructure such as pipelines and storage assets that facilitate the movement of oil and natural gas globally [2] - The company charges fees for the use of its energy assets, functioning similarly to a toll on a bridge [2] Industry Context - The midstream sector is essential for the energy industry, as it ensures the movement of oil and gas regardless of price fluctuations, leading to relatively reliable cash flows throughout economic cycles [3] Comparison with Peers - Energy Transfer's business model is not unique; for instance, Enterprise Products Partners (EPD) operates similarly but offers a lower yield of 6.9%, which may be a more prudent choice for investors [4] - Enterprise Products Partners has a history of increasing its distribution consistently, even during uncertain times, contrasting with Energy Transfer's past distribution cut [7][8] Reliability Concerns - Energy Transfer's distribution has been increasing since 2021 after a significant cut in 2020, which raised concerns about its reliability among dividend investors [5] - The lack of explanation for the 2020 distribution cut and the subsequent focus on debt reduction during uncertain times has led to skepticism regarding Energy Transfer's commitment to consistent payouts [5][8] Investor Considerations - For dividend investors prioritizing income consistency, Enterprise Products Partners may be viewed as a better option due to its track record of regular increases, despite its lower yield [9]