I own over 100 stocks. However, I do have my favorites.
One of those is Energy Transfer (ET +0.64%). Here's why it's my No. 1 favorite stock to buy right now.
Energy Transfer checks all the boxes
Energy Transfer is an income-producing machine. The master limited partnership (MLP) currently yields over 8%. That's several times higher than the S&P 500's 1.2% yield. As someone who likes to generate passive income, Energy Transfer's big-time yield is very appealing to me.
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Normally, a yield that high would be a warning sign. However, that's not the case with Energy Transfer. The midstream giant generates abundant cash flow to support that prodigious payout. Through the first nine months of this year, the MLP produced nearly $6.2 billion in cash, more than enough to cover the $3.4 billion it paid out to investors. This enabled the MLP to retain a significant amount of money to fund its continued growth.
NYSE: ET
Key Data Points
Speaking of growth, Energy Transfer has an abundance of it coming down the pike. The company is investing $4.6 billion in growth capital projects this year and plans to spend another $5 billion in 2026. The MLP has a long list of expansion projects underway, including the $5.3 billion Desert Southwest Expansion project that it expects to finish by 2029. These projects will grow its cash flow as they enter commercial service, giving the MLP more fuel to increase its high-yielding distribution, which it intends to grow by 3% to 5% each year.
Meanwhile, investors get all that growth and income for a cheap price. Energy Transfer currently has the second-lowest valuation in the energy midstream sector. At about nine times earnings, it's significantly cheaper than the peer group average of around 12 times. There's no reason for that discount, given the company's strong financial profile (it's in the best financial shape of its history) and healthy growth pipeline.
Energy Transfer's combination of financial strength, high yield, low valuation, and strong growth prospects is why it's my favorite stock to buy right now.
