Energy Transfer (ET +1.79%) offers investors an enticing income stream. The master limited partnership's (MLP) distribution yield is around 8%. That's several times above the S&P 500's 1.3% dividend yield.
Here's a closer look at how much money the MLP will distribute to its investors this year.
NYSE: ET
Key Data Points
Drilling down into Energy Transfer's distribution payment
Energy Transfer pays its investors a quarterly distribution of $0.3175 per unit ($1.27 annualized). The MLP had about 3.4 billion outstanding common units at the end of the first quarter. That put its total cash outlay at nearly $1.1 billion in the period. At that rate, the MLP will distribute a little less than $4.3 billion in cash to its unitholders in 2024.
The total payment will likely be a little bit higher than that this year. Energy Transfer has pledged to increase its distribution per unit by 3% to 5% each year, with modest raises coming each quarter. On top of that, the company agreed to buy WTG Midstream in a nearly $3.3 billion deal, partially funded by issuing 50.8 million new common units. The combination of a growing distribution per unit and an increase in its total outstanding units will likely push its distribution level above $4.3 billion for the full year.
Energy Transfer can easily afford to cover that level of cash distributions. It produced nearly $2.4 billion in distributable cash flow in the first quarter and should generate about $7.5 billion for the full year. That's enough to cover its distribution and fund its expansion projects (about $2.9 billion) with room to spare.
A well-oiled income-producing machine
Energy Transfer pays a very lucrative distribution to its investors. The MLP can easily cover its payout with its massive cash flow. It has plenty left over to fund its growth, giving it the fuel to increase its already enormous payout. These features make it an attractive option for those seeking an above-average and steadily rising income stream.
