Energy Transfer's (ET 0.12%) aggressive expansion in years past put it in a difficult financial position. That all came to a head in 2020 when deteriorating market conditions during the pandemic left the midstream company with no choice other than to slash its distribution so it could retain additional cash to shore up its finances.

Because of its issues and that payout cut, I wouldn't even consider buying any more units of the master limited partnership (MLP).

However, Energy Transfer has come a long way over the past few years. Its balance sheet is back on solid ground, enabling it to return its payout to its pre-pandemic level earlier this year. It has since raised its distribution past that prior peak and sees more growth ahead. That vast improvement has me gobbling up units of the high-yielding MLP this year.

Delivering on its promises

I've followed Energy Transfer closely over the years. A failed options trade forced me to buy units right as the market collapsed in the early days of the pandemic.

Things quickly went from bad to worse as Energy Transfer would go on to cut its lucrative distribution by 50% after a few months into my ownership. Although I decided to hold, I had no desire to add to my position.

That changed this year. The MLP's distribution cut delivered the desired deleveraging. Energy Transfer has since reduced its leverage ratio to its target range of 4 to 4.5 times. That allowed the company to deliver on its promise of returning its payout to its pre-pandemic peak, which it accomplished in January.

Meanwhile, in April, the pipeline giant said that it aims to grow its payout by 3% to 5% each year by giving investors small quarterly raises. It has already increased the distribution twice more this year, boosting the current yield to around 9.6%. 

Energy Transfer has plenty of fuel to deliver on its goal of distribution growth. The MLP produces significant excess cash after funding its distribution and capital expenses, giving it room to raise the payout. On top of that, its already-substantial cash flows should rise in the future as the company completes expansion projects and makes value-enhancing acquisitions.

Going on a buying binge

The company's progress over the past few years has impressed me. It now pays a very high-yielding distribution that's much more sustainable. And it expects to steadily increase that payout in the future. Because of that, I've added to my position four times already this year to increase the income I earn from Energy Transfer.

My position will likely grow even bigger by the end of this year. The company recently agreed to acquire fellow MLP Crestwood Equity Partners (CEQP) in a $7.1 billion all-equity deal. I also own Crestwood. Because of that, I'll see my Crestwood position converted into units of Energy Transfer if the deal goes through.

The acquisition will enhance Energy Transfer's ability to pay distributions. The company expects the deal to immediately boost its distributable cash flow per unit. And it will have a neutral impact on its leverage ratio.

Also, the company expects to capture about $40 million of annual cost savings by combining operations. That's before any potential additional benefits from refinancing Crestwood's debt or from commercial opportunities that emerge because of its greater scale. 

Once the merger is complete, Energy Transfer will become one of my portfolio's top passive income producers. Given its progress in shoring up its financial profile, the growth reacceleration ahead, and its value proposition, I would have no problem buying more of its high-yielding units in the future.

Energy Transfer has won me over

I initially regretted adding Energy Transfer to my portfolio because it soon slashed its distribution, which was the main draw. Now, I'm glad I stuck with the MLP.

It has delivered on its deleveraging plan and the promise to return its payout to its former peak. Management expects to steadily increase its big-time payout, fueled by organic expansions and value-enhancing acquisitions like Crestwood.

That's why I can't stop adding to my position this year, which I expect to continue doing in the future.