Energy Transfer Just Raised Its Distribution for the 20th Straight Quarter. Here’s How Much $10,000 Invested Pays Annually.

Energy Transfer (ET -1.41%), one of the largest pipeline-focused master limited partnerships (MLPs), recently announced its 20th consecutive increase in its quarterly cash distribution. Raising its quarterly distribution by more than 3%, the company now pays $0.3425 per unit quarterly, or $1.37 per unit annually.

That said, given how Energy Transfer has implemented a dividend cut in the recent past, management’s touting of its “20th consecutive quarterly increase” is a bit misleading. Yet, while Energy Transfer may lack the dividend growth track record of other pipeline stocks, that doesn’t mean you need to stick this name in your “stay away” pile.

Generating income from a $10,000 Energy Transfer investment

Based on Energy Transfer’s current stock price of around $19 per share, a $10,000 investment would buy you around 526 units. Multiply that by the annualized distributions, and the total amount of distributions from this investment is around $720 per year.

This equates to around a 7.1% forward distribution yield, well above the S&P 500 current forward dividend yield of around 1.1%. This also represents a higher forward yield than peers, such as 6.1%-yielding Enterprise Products Partners and 5.7%-yielding Enbridge.

Past cuts, recent raises, and dividend sustainability

Energy Transfer may have cut distributions in the past, but I wouldn’t anticipate this happening again anytime soon. For one, Energy Transfer’s distribution cut was due primarily to the COVID-19 outbreak, a black swan event. Moreover, consider Energy Transfer’s latest quarterly results. For the quarter ending Sept. 30, the MLP reported distributable cash flow of $2.5 billion versus $1.18 billion in distributions.

Energy Transfer is also pursuing acquisitions it believes are accretive to its distributable cash flow, such as its recently announced $2.6 billion deal for Vaquero Midstream, and continues to invest billions organically to expand its pipeline network. Although future performance hinges heavily on the macro backdrop for energy, until signs of an unfavorable shift emerge, consider Energy Transfer another top choice among pipeline stocks for income-focused investors.