Midstream-giant Energy Transfer (ET -2.03%) is having an excellent year. The master limited partnership (MLP) recently released its third-quarter results, delivering 20% earnings and cash flow growth. That allowed the company to raise its full-year forecast.

It also gave the energy company plenty of money to cover its big-time distribution. The MLP has boosted that payout by more than 70% this year, pushing the yield over 8.4%. Is that monster payout worth buying or too good to be true?

Drilling down into Energy Transfer's third quarter results

In the third quarter, Energy Transfer generated $3.09 billion of adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA). That's roughly 20% more than the $2.58 billion it produced in the year-ago period. Those surging earnings came even though the company experienced a $126 million charge related to a legal matter in its crude oil transportation segment and a negative $130 million adjustment related to its hedge inventory of natural gas liquids (NGLs). 

Meanwhile, the MLP produced $1.58 billion of distributable cash flow. That's up about 20% from the $1.31 billion it made in the year-ago period.

It was enough money to cover its big-time distribution by a comfortable 1.93 times, enabling it to retain $760 million of cash. Energy Transfer used those retained earnings to fund expansion projects, make an acquisition, and reduce debt. The company also closed the sale of its Canadian unit, further strengthening its balance sheet.

Energy Transfer benefited from strong conditions in the energy market during the third quarter. Volumes were up across all five of the company's core business segments. It set records for intrastate natural gas transportation volumes, midstream gathered volumes, and NGL volumes fractionated. (The latter is a process that separates liquids like ethane, butane, and propane from the NGL stream.) That's partly due to last-year's acquisition of Enable Midstream.

The company also benefited from the proximity of its assets to the U.S. Strategic Petroleum Reserve. The Biden Administration has tapped that resource this year to lower gas prices following Russia's invasion of Ukraine. That's driven increased activity for Energy Transfer's assets, with its Nederland and Houston terminals setting records in the period.

A look at what's ahead for Energy Transfer

Energy Transfer's strong showing in the third quarter has it on track to produce $12.8 billion to $13 billion of adjusted EBITDA this year. That's up from its prior forecast of $12.6 billion-$12.8 billion. 

The company affirmed its plan to invest $1.8 billion to $2 billion in organic expansions this year. More than 90% of those projects are either already online or will start contributing cash flow by the end of 2023. That should give it the fuel to continue growing its earnings and cash flow over the next year. 

Meanwhile, Energy Transfer continues to pursue projects to fuel future growth. One of the more notable projects is the potential conversion of its Lake Charles facility into a liquefied natural gas (LNG) export complex. It has signed long-term contracts with six buyers for 7.9 million tons of LNG annually and is working to secure additional contracts for the remaining capacity of the 16.5 million-ton facility.

Energy Transfer is also seeking funding partners to help finance its construction. The company is now hoping to make a final investment decision early next year. Lake Charles would boost Energy Transfer's natural gas pipeline businesses, while supplying it with incremental income from its share of the investment to build the facility.

Growing stronger by the quarter

Energy Transfer's business continues to strengthen. The midstream giant is generating lots of cash, giving it the money to pay a large (and growing) distribution, fund expansion projects, and reduce debt. Those last two features should enable the company to continue growing its cash flow and distribution in the future. Because of that, it's a very attractive buy for those seeking a big-time passive income stream that should grow even larger in the coming years.