Energy Transfer (ET 0.05%) pays a prodigious cash distribution to its investors. The master limited partnership (MLP) currently yields 6.1%, which is several times higher than the S&P 500's dividend yield of around 1.2%. That means you can generate more income on every dollar you invest in the midstream company.
Here's a look at how many units of the MLP you'd need to own to get paid $5,000 each year. You'd also need to be comfortable investing in MLPs, which have some added tax complexities, such as sending investors a Schedule K-1 Federal Tax Form each year.
NYSE: ET
Key Data Points
Energy Transfer currently pays its investors $0.3225 per unit each quarter, or $1.29 annually. At that rate, you'd need to own 3,876 units of the MLP to collect $5,000 of annual distributions.
With its unit price recently around $21 apiece, you'd need to invest about $81,395 in Energy Transfer to produce $5,000 in yearly distributions. That's a lot of money for most investors. However, it's much less than they'd need to invest than in many other alternatives to produce that same annual income.
For example, the Vanguard S&P 500 ETF (VOO +1.23%), a popular exchange-traded fund (ETF) that tracks the S&P 500, has paid $6.70 per share of dividends over the past year. At that rate, you'd need to own 746 shares of this ETF to collect $5,000 in dividends each year. Given its higher share price of almost $560 and its lower dividend yield of around 1.2%, you'd need to invest more than $417,690 into the ETF to reach that same annual income level.
Another thing worth noting about Energy Transfer is that the MLP aims to increase its distribution payment each quarter. It has raised its payout by 3.2% over the past year. That aligns with its goal of growing its distribution by 3% to 5% annually. With its growth drivers including accretive acquisitions and a growing pipeline of organic expansion projects, it can be a great investment for those seeking a steadily rising income stream.
