Income investors don’t have to choose between a high dividend yield and dividend growth.
Because in the midstream energy sector, it’s possible to get both, and often at valuations that remain well below the broader market
Two of the best examples are Energy Transfer (NYSE: ET) and Enterprise Products Partners (NYSE: EPD). Both operate massive pipeline and energy infrastructure networks that generate largely fee-based cash flow, making them less dependent on daily swings in oil and natural gas prices than exploration and production companies. Moreover, both continue to increase their distributions while trading at relatively inexpensive valuations.
Energy Transfer Energy Transfer stands out as one of the cheapest large-cap income stocks in the energy sector. The partnership currently yields about 6.7%, more than 6 times the S&P 500’s dividend yield of roughly 1.05%, while still trading at a valuation below many of its large midstream peers. Energy Transfer owns one of the largest energy infrastructure networks in North America, with more than 140,000 miles of pipelines transporting natural gas, crude oil, natural gas liquids, and refined products across 44 states.