Energy Transfer (ET +2.62%) is one of the largest midstream energy companies in the United States, with more than 140,000 miles of pipeline for transporting crude oil, natural gas, liquefied natural gas (LNG), natural gas liquids (NGLs), and other refined products.
The company recently upgraded its 2026 growth capital expenditure (capex) guidance to $5.5 billion to $5.9 billion, up from an initial estimate of $5 billion to $5.5 billion, demonstrating its shift to a cycle of growth.
For income and growth investors, this elevated spending level carries several critical implications.
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The build-out is connected to a backlog
This isn’t speculative “build-it-and-they-will-come” spending. Management has stated these projects are underpinned by long-term, fee-based volume commitments targeting mid-teens returns. A substantial portion of this capital is flowing toward meeting the massive demand for natural gas-fired electricity generation to support artificial intelligence (AI) data centers.
Today’s Change
(2.62%) $0.52
Current Price
$20.18
Key Data Points
Market Cap
Day’s Range
$19.79 – $20.21
52wk Range
$16.18 – $20.70
Volume
384.9K
Avg Vol
11.7M
Gross Margin
11.57%
Dividend Yield
6.79%
The company has announced three major gas pipeline projects this year, in addition to three pipeline laterals designed as direct connections to end users, so it already has waiting customers for its projects.
Key drivers for these projects include the gas-to-electricity trend, especially for fueling data centers, and growth in natural gas liquids exports. For example, Energy Transfer’s Texas network will supply natural gas to the Nexus Hubbard Campus in central Texas, fueling the on-site generation that powers their new AI hyperscale facility.
Energy Transfer’s aggressive capital spending is being driven by a combination of generational shifts in power demand, regional production gluts, and a deliberate decision to pivot away from high-risk megaprojects toward immediately accretive infrastructure.
Its dividend is safe, even with expansion plans
In past cycles, a heavy capex budget might have raised red flags regarding the safety of the partnership’s distribution. However, Energy Transfer’s financial footing is solid. The company raised its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) to between $18.2 billion and $18.6 billion, meaning the company has immense cash flow.
In the first quarter, Energy Transfer reported revenue of $27.7 billion, up 32% year over year. Adjusted EBITDA was $4.94 billion, up 20.5% over the first quarter of 2025, and distributable cash flow (DCF) was $2.7 billion, up 16.8% year over year.
The company’s DCF easily covers its 6.77% distribution yield, as of its current share price, and provides a heavy multibillion-dollar internal equity cushion to self-fund this growth. Dilutive equity issuance to fund this backlog is off the table.
Energy Transfer said it plans to keep raising distributions by 3% to 5% each year. It’s increased its distributions for 18 consecutive quarters.
Investors may need to be patient
While the projects are high-return, infrastructure takes time to build and commission. Because billions of dollars are actively tied up in construction work in progress (CWIP), they are not yet generating EBITDA.
Energy Transfer’s shares have risen by more than 19% this year, but that trend may slow. The company’s spending plans will likely keep the company’s forward valuation multiple compressed in the near term, at just below 13 times forward earnings. The true rerating and subsequent free cash flow inflections are more likely to be a late-2027 and 2028 story once these assets go into service.
Because the company is allocating more capital to organic projects rather than aggressively buying back units or overindexing on distribution hikes, investors should expect management to stick to its conservative 3% to 5% annual distribution growth target. It strikes a clear balance: Reward unit holders today while fully capitalizing on a generational build-out of energy infrastructure.
