Is Energy Transfer the best ultra high yield dividend stock to buy right now?
This middling powerhouse has a lot going for it.
How many ultra-high dividend yield stocks are there? The answer depends on how you define “ultra-high.” My working definition is that ultra-high yield is four times or more the current dividend yield S&P 500 (SNPINDEX: ^GSPC)which currently means a yield of roughly 4.4%. As best I can tell, in the constellation of 1,800 stocks, they qualify as ultra-high yielding dividend stocks.
Answering this question required some effort, but it was nothing compared to trying to determine best ultra high yield dividend stocks. As I pondered this more complex question, several stocks immediately popped into my head.
Energy transfer (AND 0.06%) he was one of them. Is this midstream energy leader the best ultra-high yield dividend stock to buy right now?
To support energy transfer
Probably the main reason why I immediately thought of Energy Transfer as a candidate for the best ultra-high yield dividend stock is because of its roughly 7.9% yield. Hundreds of stocks offer even higher returns, but what sets Energy Transfer apart from many of them is the sustainability of its distribution.
Don’t be fooled by Energy Transfer’s relatively high payout ratio based on 100% earnings. The Company generates sufficient distributable cash flow to fund its distributions. Management expects distribution to grow consistently by 3% to 5% each year.
Energy Transfer’s business isn’t just messing around either. The midstream operator grew its adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) at a compound annual growth rate of 10% from 2020 to 2024. It should be able to continue to grow at a solid pace, thanks in part to growing demand for power from data centers that host artificial intelligence (AI) applications.
Valuation may not be an obvious factor in choosing the best ultra high yield dividend stock. However, an attractive valuation should make it more likely that the stock will generate higher total returns over time.
Energy Transfer’s forward price-to-earnings ratio (P/E) is a low 9.7. The company’s trailing 12-month enterprise value to EBITDA is also the second lowest in the same group.
A few strikes against him
Perhaps the most compelling argument against Energy Transfer being the best ultra-high yield dividend stock is its distribution track record. Certainly, the company has increased its distribution in recent years and should continue to do so. However, Energy Transfer suspended its distribution in 2020 as a direct result of the COVID-19 pandemic.
This highlighted one significant risk for the midstream company. Energy Although Transfer’s cash flow is largely insulated from fluctuating commodity prices, its business could be adversely affected by a sharp decline in demand for oil and gas.
Another by-product of Energy Transfer’s business is its high level of indebtedness. It is expensive to build pipelines, natural gas processing plants and other facilities. The company’s leverage ratio is in the lower half of its target range of 4x to 4.5x. However, an unexpected rise in interest rates could cause problems.
Energy Transfer was also not a winner for investors in 2025. Its unit price is down roughly 15% year to date.
I don’t think this is a major issue, especially considering that Energy Transfer has returned around 180% over the past five years. But the stock’s less-than-stellar recent performance could hurt the midstream leader’s claim as the best ultra-high yield dividend stock.
Today’s Change
(-0.06%$-0.01
Current price
$16.76
Key data points
Market capitalization
58 billion dollars
Daily range
$16.56 -$16.79
Range 52 weeks
$14.60 -$9:45 p.m
Volume
219
Avg. flight
13M
Gross margin
12.58%
Dividend yield
0.08%
The Best Ultra High Yield Dividend Stock?
Is Energy Transfer the Best Dividend Ultra High Yield Stock? Probably not. There are too many objections to it.
That said, I think the company is a good dividend stock for investors looking for high yield to buy right now. The stock’s attractive valuation and growth prospects are big pluses in its favor. Energy Transfer’s distribution should continue to grow over the next few years.
What is best ultra high yield dividend stock? I don’t know. But what I do know is that stocks don’t have to be the best to make investors money over the long term.