North American midstream master limited partnership Energy Transfer (NYSE:ET) posted record earnings in the first quarter of 2019. That's a continuation of a trend after a strong 2018 in which adjusted EBITDA rose a massive 30% year over year.

The partnership offers a huge 8.8% distribution yield that's backed by strong performance -- is now the time to jump aboard? Read this before you decide.

A transformation

Energy Transfer deserves some kudos. It wasn't too long ago that it was struggling to cover its distribution because it was forced to help prop up a controlled partnership that was facing funding issues.

It eventually combined the two businesses to simplify its structure and deal with the coverage issue. In the first quarter, meanwhile, Energy Transfer covered its distribution by an incredibly strong two times. For reference, 1.2 times is considered a good number in the limited-partnership sector.

A welder in full gear working on an oil pipeline in the outdoors.

Image source: Getty Images.

On top of that, the company is putting up record results with every expectation of the trend continuing. It has roughly $5 billion in capital-spending plans this year, which management projects will push adjusted EBITDA up another 12.5% in 2019, based on the midpoint of its guidance.

Although many of Energy Transfer's biggest projects will have wrapped up this year, the company continues to have growth opportunities over the longer term. Organic opportunities for expansion on top of plans for two energy export terminals suggest growth won't come to a screeching halt, even if growth does slow down some in the near term. With an over 8% yield, though, investors will be paid well to wait for the next round of projects to bear fruit.

Energy Transfer has also seen notable improvement on its balance sheet. Financial debt to EBITDA has gone from more than eight times to around 4.7 times over the past year or so. That's largely been driven by EBITDA growth, of course, but it has brought the company's leverage back down to a more comfortable range. Now consider that the yield is more than 2 percentage points above industry bellwether Enterprise Products Partners, and Energy Transfer starts to look pretty compelling.

Don't jump just yet

Although Energy Transfer appears to be a very attractive opportunity for income investors, there's one notable fly in the ointment. In 2015, Energy Transfer (technically Energy Transfer Equity, which was purchased by Energy Transfer LP in the above noted simplification transaction) agreed to buy The Williams Companies. It quickly became obvious that the company had made a mistake, and management worked to scuttle the deal it had initiated.

On one hand, it was good to see management recognize the error and try to fix it before the deal closed. However, the steps it took to get out from under something it had agreed to were a little troubling.

The big risk was that the deal would require Energy Transfer to issue so much debt or equity to consummate that the company wouldn't be able to support its distribution. Williams, meanwhile, didn't want to see the deal collapse, and the two companies ended up in court. Eventually, Energy Transfer was able to kill the acquisition.

A young woman with long blonde hair wearing a business suit and drawing a risk versus reward graph.

Image source: Getty Images.

The problem is that the step that ultimately ended the deal involved Energy Transfer selling a convertible bond. Roughly half of the bond offering was sold to CEO Kelsey Warren. He's still the CEO. That convertible bond would have, effectively, shielded him from a dividend cut had the acquisition gone through as originally agreed.

Step back and think about that for one second. The CEO of Energy Transfer appears to have put himself ahead of shareholders at a time of crisis. It was a calculated bet that paid off and nobody is worse off. But there are legitimate trust issues here that need to be taken into consideration before you buy this partnership today.

The future or the past?

Some might say that the Williams saga is water under the bridge. That's understandable: Energy Transfer appears to be a compelling, high-yield investment opportunity today. Indeed, Wall Street tends to look forward the vast majority of the time. However, spending too much time looking to the future often leads investors to forget the lessons of the past.

For those with a moderate to conservative bent, Energy Transfer's moves to scuttle the Williams deal should bring up very real concerns about trust. If things get bad again, will management do what's right for unitholders or what's right for management? That single question should be enough to keep most on the sidelines. There are too many other investment opportunities to risk the uncertainty around trust here.