Adding a high-quality, high-yield dividend stock to your portfolio could be a smart move for generating steady income. In addition to income, top dividend stocks may also offer modest capital appreciation over time.
Among the top dividend-paying stocks, Energy Transfer (ET) stands out for its high dividend yield of 7.4% and a solid history of increasing its dividend, supported by steady earnings and robust distributable cash flow (DCF).
Energy Transfer has a solid record of offering high and sustainable yield. As a diversified energy infrastructure company, it transports and sells natural gas (NGQ25) throughout the U.S. Its vast intrastate pipeline network is among the largest in the country, connecting key natural gas sources with industrial users, power generators, utilities, and third-party pipelines. This reach gives the company a strong position in the domestic energy logistics landscape, driving the utilization of its systems.
Furthermore, Energy Transfer’s integrated business model is both product- and geographically diversified. This structure enables it to operate efficiently while mitigating risks associated with market fluctuations. A key part of its operating strategy is locking in long-term, fee-based contracts with third parties. These arrangements provide a more predictable and stable cash flow, insulating the company from the volatility of commodity prices. This stability, in turn, supports the company’s ability to consistently grow its DCF and drives higher dividend payments.
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Energy Transfer also focuses on enhancing the profitability of its existing asset base. It continues to secure long-term volume commitments from producers, improve operational efficiencies, and pursue new initiatives to boost utilization. These efforts not only strengthen the company’s bottom line but also create more room for dividend growth.
Reflecting its commitment to rewarding shareholders, Energy Transfer increased its quarterly dividend by 3% to $0.3275 per share, or $1.31 on an annualized basis. That equates to a forward yield of roughly 7.4%.
With its strong portfolio of assets, reliable contracted earnings, solid growth potential driven by rising electricity demand, and a commitment to increasing shareholder payouts, Energy Transfer stands out as an attractive option for investors seeking steady passive income and high yields.
Energy Transfer is well-positioned for consistent dividend growth, supported by its stable cash flows, strategic capital investments, and growing demand for natural gas infrastructure. It will benefit from its take-or-pay contracts, which help insulate the company from market volatility. This steady cash flow forms the foundation for its growing distributions to shareholders.
At the same time, Energy Transfer is executing a robust backlog of growth projects that are already well-contracted with high-quality counterparties. These projects are expected to deliver attractive returns and strengthen the company’s integrated value chain across the energy ecosystem. Some of these projects are already beginning to contribute to earnings, and their full financial benefits are anticipated to ramp up meaningfully starting next year. As capital expenditures are quickly converted into cash flow, the company is expected to generate resilient earnings and increasing distributable cash flow (DCF), supporting future dividend hikes.
Energy Transfer is also benefiting from structural tailwinds in the natural gas market. Its extensive infrastructure network puts it in a solid position to meet rising demand from data centers, power plants, and liquefied natural gas (LNG) facilities. This demand is expected to grow as the energy sector evolves to support digitalization and decarbonization.
Looking ahead, management is targeting roughly $5 billion in organic growth capital investments in 2025. These projects are projected to deliver mid-teen returns and bring additional downstream benefits. Most are scheduled to come online in 2025 and 2026, with earnings contributions from these investments expected to accelerate significantly into 2026 and 2027.
Energy Transfer recently announced an agreement with CloudBurst data centers. Under this long-term agreement, Energy Transfer will supply natural gas to CloudBurst’s flagship AI-focused data center in Central Texas. These types of deals are capital-light and revenue-generative on relatively short timelines, making them particularly attractive.
Overall, Energy Transfer’s solid fundamentals position it well to grow the dividend at an annual rate of 3%-5%, strengthening its appeal as a reliable income investment.
Wall Street analysts maintain a “Strong Buy” consensus rating on Energy Transfer stock. Its focus on generating fee-based earnings, a strong pipeline of growth projects, and a high yield of 7.4% make it a solid investment for investors seeking steady passive income.
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On the date of publication, Amit Singh did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com
