The oil and gas industry offers some big dividend yields, and some companies are also increasing their dividends annually. Energy Transfer (NYSE:ET) is one such dividend stock. The midstream energy company operates an extensive network of pipelines and earns nearly 90% of its earnings from long-term, fee-based contracts, which reduces its sensitivity to commodity prices.
As a master limited partnership (MLP), Energy Transfer also distributes a major portion of its free cash flow as dividends. Combined, the two factors mean regular and growing dividends for shareholders.
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Energy Transfer stock offers a juicy dividend yield of 7.5% right now, and you could earn $5,000 in yearly dividends from the stock. Here's how.
Having increased its dividend by 3.2% in the fourth quarter, Energy Transfer last paid a quarterly dividend per share of $0.325, or an annualized dividend of $1.30 per share. If you buy 3,847 shares of Energy Transfer, you can collect $5,000 in annual dividends from your investment.
With the pipeline stock trading for roughly $17.65 apiece as of this writing, an investment of $67,900 today can fetch you $5,000 in dividends annually from Energy Transfer.
Business growth should support bigger dividends and a high yield
You can, in fact, expect bigger dividend checks from Energy Transfer every year, given its goal to increase its dividend per share by 3% to 5% annually, driven by investments in growth.
The oil and gas giant aims to balance organic expansion with opportunistic acquisitions to grow in the coming years. After spending $3 billion on growth in 2024, Energy Transfer is projecting $5 billion in growth capital expenditure for 2025, with a significant amount directed toward expansion in the Permian Basin. It is also building out its natural gas liquids pipeline and constructing an intrastate natural gas pipeline called the Hugh Brinson to transport its Permian production to premier trading hubs through Texas and beyond.
Should you invest $1,000 in Energy Transfer right now?
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Neha Chamaria has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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