Is Energy Transfer Stock a Millionaire Maker?

Leo Sun, The Motley Fool

Wed, Mar 26, 2025, 3:53 AM 4 min read

Energy Transfer (NYSE: ET), one of the largest midstream companies in the U.S. with over 125,000 miles of pipeline across 44 states, went public at a split-adjusted price of $5.50 per unit on Feb. 3, 2006. A $10,000 investment in that master limited partnership (MLP) would be worth $36,150 today and paying out $2,527 in annual dividends on a quarterly basis. If you had reinvested those dividends, your investment would be worth $123,000 and paying out nearly $8,600 in annual dividends.

That's a decent 19-year gain, but the same $10,000 investment in an S&P 500 index fund (without reinvested dividends) would be worth $45,560 today. Energy Transfer wouldn't have made you a millionaire unless you had invested more than $100,000 in its IPO.

But could Energy Transfer generate millionaire-maker gains as rising energy costs drive more states to support the construction of new natural gas pipelines? Let's review its business model, growth rates, and valuations to find out.

As a midstream company, Energy Transfer provides pipeline, storage, and terminalizing services for natural gas, natural gas liquids (NGLs), crude oil, and refined products. By building those pipelines, it acts as a "toll road operator" for a wide range of upstream production and downstream consumption companies.

Energy Transfer has expanded rapidly through acquisitions since its public debut. It acquired Sunoco and Southern Union Company in 2012, Susser Holdings in 2014, Regency Energy Partners in 2015, its own partner Energy Transfer Partners in 2018, SemGroup in 2019, and Crestwood Equity Partners in 2023.

It's also investing a lot of cash into its existing pipelines. For 2025, it expects its growth capital expenditures to rise 69% to approximately $5 billion as it aggressively expands its operations in the Permian Basin and other regions.

But as Energy Transfer expanded, it faced mounting opposition from government regulators, Native American tribes, and environmental organizations like Greenpeace USA over safety and territorial concerns. The Dakota Access Pipeline, which it owns a 38.2% stake in, was a major flashpoint for many of those conflicts throughout its construction from 2016 and 2017.

From 2014 to 2024, Energy Transfer's revenue grew at a compound annual growth rate (CAGR) of 4% as its earnings per unit (EPU) rose at a CAGR of 8%. As an MLP, Energy Transfer pays out most of its earnings per unit as dividends to its investors.

Energy Transfer spent nearly 100% of its EPU on its dividends over the past 12 months. It's also raised its dividend annually for 12 consecutive years, and it pays a forward yield of nearly 7% -- which is much higher than the 10-year Treasury's 4.3% yield.