Energy Transfer (NYSE: ET) is known more as an income investment. With a distribution yield currently hovering around 6.5%, that makes sense.
However, the master limited partnership (MLP) offers more than an attractive income stream. It's also growing at a solid clip, which should continue through at least the end of the decade. Here are three factors fueling that view.
Last year, Energy Transfer grew its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) by 13%, while its distributable cash flow rose 10%. The main factor fueling its growth was acquisitions, specifically, its merger with Crestwood Equity Partners at the end of 2023 and its acquisition of WTG Midstream last July.
Growth will moderate a bit this year. It expects to deliver adjusted EBITDA growth of about 5% at the midpoint of its guidance range, driven by the WTG Midstream deal and organic expansion projects. However, earnings growth should reaccelerate in 2026. Co-CEO Tom Long noted on the company's fourth-quarter earnings call, "We're currently executing on a large opportunity set of growth projects, and we're excited to deploy capital on these impactful opportunities that are expected to provide strong returns and a significant growth trajectory through the end of the decade." He then ran through the three areas driving its growth on the call, highlighted on the following slide:
Long stated on the call that "we will continue to see strong volume growth out of the Permian Basin, where we will continue to invest capital in our midstream assets." The company has approved several expansion projects to support growing Permian Basin volumes over the past year. The most notable expansion is the Hugh Brinson Pipeline project. It approved the first phase of the natural gas pipeline in December, which will have the capacity to transport 1.5 billion cubic feet per day (Bcf/d) from the Permian to the Dallas area when it enters service at the end of next year. Phase 2 could expand the capacity to 2.2 Bcf/d, and the project's price tag to $2.7 billion. Energy Transfer also recently approved the construction of the Badger and Mustang Draw natural gas processing plants to help support growing gas volumes in the Permian.
The production growth in the Permian will help support rising demand for natural gas and natural gas liquids (NGLs), the other two major growth themes the company sees ahead.
On gas growth demand, Long noted: "The broader consensus, combined with the number of inbounds we're receiving, suggests that natural gas fuel power demand will increase significantly in the future. We believe the growth needed to accommodate this demand will be significant, and we are in a unique position to capitalize on this opportunity set." For example, Energy Transfer recently signed a new partnership with data center developer CloudBurst to support one of its new projects. That's likely the first of many projects to support growing gas-fired power demand from data centers and electric utilities.