Recently, there's been a flurry of positive dividend activity in the midstream energy sector with both well-known and lesser-heralded pipeline firms boosting payouts.
Energy Transfer (ET +2.29%) is one of the guests at the midstream dividend increase party. Following a July distribution increase of nearly 1%, Energy Transfer's consecutive streak of boosted payouts now spans an impressive 19 quarters, or nearly five years for those keeping score at home. Typically, Energy Transfer delivers gentle upside nudges to its dividend, and investors love the consistency.
Energy Transfer continues raising its dividend and investors should expect that trend to continue. Image source: Getty Images.
Plus, those modest increases add up over time. The stock yields 6.7% and, by some estimates, if its current trajectory of dividend increases continues, the dividend could nearly double over the next decade. That'd be music to the ears of long-term investors. Fortunately, this pipeline stock has the fundamentals to keep good dividend times coming.
Stars aligning for dividend growth
Not only did Energy Transfer announce a dividend increase in July, but it also followed that up with a second-quarter earnings report and updated 2026 guidance confirming the distribution is on solid ground and poised for long-term growth.
In the June quarter, Energy Transfer's distributable cash flow (DCF), one of the bedrocks of pipeline operators' dividends, climbed to $2.59 billion from $1.96 billion a year earlier. The midstream company's DCF could continue to improve in the current quarter and beyond, driven by the revised 2026 guidance. Energy Transfer told investors it now expects 2026 full-year adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $18.8 billion to $19.1 billion, up from a prior forecast of $18.2 billion to $18.6 billion.
Regardless of sector, if there's anything that investors should demand of dividend-paying companies, it's rising earnings and cash flow. Those are telltale signs that current dividend obligations can be met and that payouts can grow over the long term.
NYSE: ET
Key Data Points
Longer-ranging support for the distribution doesn't end there. Energy Transfer is a diverse midstream operator with exposure to natural gas liquids (NGLs) and oil transportation as well as midstream gathering. That diversity matters for multiple reasons. First, management sounded optimistic about improving finances across its various segments. Second, in just a year, NGL projects went from out of fashion to being in high demand, indicating that Energy Transfer's related investments could pay dividends (pun intended).
AI angles
Investors seeking artificial intelligence (AI) "derivative" exposure while balancing low-yielding, growth-heavy portfolios with income-generating assets should look to the midstream sector, including Energy Transfer.
All those high-priced data centers need power, but it can take years for traditional utilities to obtain all the permits required to deliver grid power to data centers. Guess which companies are adept at transporting energy? Pipeline operators such as Energy Transfer.
On the company's second-quarter earnings conference call, co-CEO Thomas Long said customers are expressing interest in upping their commitments for Energy Transfer's services that deliver energy to data centers and nearby power facilities. He also mentioned "advanced negotiations" with customers in six states to provide additional natural gas volumes.
Imagine capturing steady dividends while participating in the AI trade. With Energy Transfer, that's a reality, not a dream.
