Two of the top midstream master limited partnerships (MLPs) no doubt are Energy Transfer (ET +0.91%) and Enterprise Products Partners (EPD 0.25%). Both companies own top-tier pipeline assets, although Enterprise has historically been the more conservatively run company. It has also been the better performer in 2025, generating about a 10% total return after distributions, while Energy Transfer's stock has been in the red this year.
The question, though, is which stock will outperform next year. Let's look at the cases for both stocks.
The case for Energy Transfer
NYSE: ET
Key Data Points
Energy Transfer is one of the best-positioned companies to benefit from the artificial intelligence (AI) boom and the industry's voracious need for power. It owns one of the country's largest integrated midstream systems and has access to some of the cheapest natural gas in the country, given its strong position in the Permian Basin, where drillers are more concerned about oil. Meanwhile, the company's entered growth mode, with nearly $10 billion in aggregate growth-project capital expenditures (capex) earmarked for both this year and next.
The company has two large pipeline projects to transport natural gas out of the Permian, going in opposite directions. The Hugh Brinson Pipeline, which the company has said could become its most valuable asset, will take natural gas to markets in Texas, while the Desert Southwest Pipeline will transport the commodity to the Arizona and New Mexico markets. It's also inked deals to provide natural gas directly to data center operators and builders, including Oracle, Fermi, and Cloudburst, as well as to power companies.
Meanwhile, the stock is cheap, trading at a forward enterprise value (EV)-to-EBITDA of just 7.6 times 2026 analyst estimates for $17.2 billion in adjusted EBITDA. That's a nice discount to Enterprise Products Partners, which trades at an EV/EBITDA of 9.7 times 2026 adjusted EBITDA estimates of $10.5 billion.
It also sports a yield of 8% and Energy Transfer plans to raise its distribution by 3% to 5% a year moving forward. The distribution is well covered by Energy Transfer's distributable cash flow (operating cash flow minus maintenance capex), and its balance sheet is in solid shape.
The case for Enterprise Products Partners
NYSE: EPD
Key Data Points
Enterprise Products Partners is a model of consistency, having now raised its distribution for 27 straight years, through both good and bad energy markets. The company is conservatively run, keeping low leverage (3.3x last quarter) and a high coverage ratio. Meanwhile, most of its profits come from fee-based activities (typically over 80%), which means it has minimal exposure to changes in commodity prices or spreads.
The company has aggressively invested in growth projects this year, with most set to come online this year and next, which should drive solid growth. However, it will reduce its capex budget in 2026, providing it with strong free cash flow, which gives it capital allocation flexibility to buy back stock, reduce debt, or increase its distribution.
While its valuation is higher than that of Energy Transfer, the stock has typically traded at a premium to the MLP group, given its consistency. Meanwhile, MLPs as a whole are trading at a big discount to where they were a decade ago, despite strong growth opportunities and being more financially sound. Enterprise has a robust yield of 6.7%, and grew its distribution by nearly 4% last quarter.
Image source: Getty Images.
The verdict
While both stocks look attractive heading into 2026, if I could own only one, it would be Energy Transfer. The company is not getting the credit it deserves for the strong foundation it has built over the past few years, strengthening its balance sheet and contract structures. About 90% of its business is now fee-based, and it has said that it has the highest percentage of take-or-pay contracts in its history.
With an 8% yield, low valuation, and strong growth opportunities ahead, this is a stock to own in 2026.
