--- title: "Can This 6.3% Yield Survive if Oil Crashes Again?" type: "News" locale: "en" url: "https://longbridge.com/en/news/296687462.md" description: "Energy Transfer (ET) offers a 6.3% distribution yield, raising questions about its sustainability during an oil price crash. Although ET cut its distribution in half during the 2020 downturn, it used the opportunity to strengthen its balance sheet, reducing its debt-to-EBITDA ratio from 5.4x to 4.1x. The company now targets 3%-5% annual distribution growth. While more leveraged than peer Enterprise Products Partners, ET's distributable cash flow covers distributions by 2.2x, suggesting the yield is likely to survive future energy sector volatility despite higher complexity and risk." datetime: "2026-08-22T19:56:45.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/296687462.md) - [en](https://longbridge.com/en/news/296687462.md) - [zh-HK](https://longbridge.com/zh-HK/news/296687462.md) generator: "portal-rs" --- # Can This 6.3% Yield Survive if Oil Crashes Again? If you are looking to add some yield to your portfolio, **Energy Transfer**'s (ET -0.09%) 6.3% distribution yield will likely be attractive to you. The one caveat is that it operates in the energy sector, and the last time the sector was in a downturn, Energy Transfer cut its distribution in half. Can this high-yield master limited partnership's (MLP) distribution survive the next energy downturn? ## What goes up must come down The energy sector has been upended by the geopolitical conflict in the Middle East. With reduced supply, commodity prices have risen. In fact, some of the world's largest energy companies have warned that oil and natural gas prices don't fully reflect the situation. In other words, companies like **ExxonMobil** (XOM -0.63%) and **Chevron** (CVX -0.24%) think oil prices could rise even further. ![A word cloud with the words Passive Income in large font.](https://imageproxy.pbkrs.com/https://g.foolcdn.com/image//query-b3A9cmVzaXplJnVybD1odHRwczovL2Nkbi5jb250ZW50LmZvb2xjZG4uY29tL2ltYWdlcy8xdW1uOXFlaC9wcm9kdWN0aW9uLzZhZThhMDlmOTk2OGMwYjBjMDllMWJhMGYzN2FkNDM4MjhkMjFiY2YtMTIwMHg4MDAuanBnP3c9MTIwMCZoPTgwMCZxPTc1JmF1dG89Zm9ybWF0Jnc9Mzg0MA?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg) Image source: Getty Images. This situation is headline-grabbing news, but if you look at the long-term, volatility in the energy sector is actually pretty normal. If you are investing in the energy sector for yield, you want to make sure the business you buy can support its dividend through the entire cycle, including the inevitable energy sector downturns. At first blush, Energy Transfer fails that test because it cut its distribution in half in 2020, during the energy downturn that occurred alongside the coronavirus pandemic. That, however, was a strategic decision that may actually give the midstream MLP the wherewithal to support its distribution through the next weak patch. Notably, Energy Transfer used the distribution cut to focus on strengthening its balance sheet. Debt-to-EBITDA (earnings before interest, taxes, depreciation, and amortization) has gone from a peak of 5.4x at the end of 2020 to 4.1x today. To be fair, peer **Enterprise Products Partners**' (EPD -1.09%) debt-to-EBITDA ratio went from 4.1x to 3.3x over the same span, so Energy Transfer is still more leveraged than some of its competitors. However, the longer-term trend is clear: Energy Transfer is focused on becoming a more financially sound and reliable business. ET Financial Debt to EBITDA (TTM) data by YCharts ## Energy Transfer's new goal is slow and steady growth With the balance sheet in better shape, Energy Transfer's current target is for distribution growth of 3% to 5% a year. That's completely reasonable and is roughly in line with what investors have seen from Enterprise Products Partners, which offers a slightly lower 5.7% yield. Enterprise, however, has a long history of increasing its distribution annually, with a streak that runs 28 years. That's roughly as long as Enterprise has been publicly traded. Expand ![Energy Transfer Stock Quote](https://imageproxy.pbkrs.com/https://g.foolcdn.com/image//query-b3A9cmVzaXplJnVybD1odHRwczovL2cuZm9vbGNkbi5jb20vYXJ0L2NvbXBhbnlsb2dvcy9tYXJrL0VULnBuZyZ3PTEyOA?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg) ## NYSE: ET Energy Transfer Today's Change (-0.09%) $-0.02 Current Price $21.19 ### Key Data Points Market Cap $73BMarket cap calculated using publicly traded shares outstanding only. Does not include unlisted, private, or dual-class non-traded shares. Implied market cap may vary. Day's Range $21.06 - $21.34 52wk Range $16.18 - $21.64 Volume 10.1M Avg Vol 9.1M Gross Margin 10.94% Dividend Yield 6.35% For conservative dividend investors, Enterprise is likely the better option. But, if you are trying to maximize the income you generate, Energy Transfer's added risks may be worth it for more aggressive investors. Indeed, both companies own large energy infrastructure portfolios and generate reliable cash flows from fees. Essentially, the volume that Energy Transfer and Enterprise move through their systems is more important than the price of the commodities being moved. Expand ![Enterprise Products Partners Stock Quote](https://imageproxy.pbkrs.com/https://g.foolcdn.com/image//query-b3A9cmVzaXplJnVybD1odHRwczovL2cuZm9vbGNkbi5jb20vYXJ0L2NvbXBhbnlsb2dvcy9tYXJrL0VQRC5wbmcmdz0xMjg?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg) ## NYSE: EPD Enterprise Products Partners Today's Change (-1.09%) $-0.42 Current Price $38.01 ### Key Data Points Market Cap $82BMarket cap calculated using publicly traded shares outstanding only. Does not include unlisted, private, or dual-class non-traded shares. Implied market cap may vary. Day's Range $37.95 - $38.59 52wk Range $30.01 - $40.16 Volume 3.1M Avg Vol 3.1M Gross Margin 12.98% Dividend Yield 5.80% In fact, in some ways, Energy Transfer's distribution looks safer than Enterprise's. Energy Transfer's distributable cash flow covered its distribution by a robust 2.2x in the second quarter, while Enterprise's distribution was covered by a lower, but still strong, 1.9x. Both MLPs have material leeway to deal with adversity. ## Complexity could be the decision maker That said, Energy Transfer is a more complex business, noting that it also controls two other publicly traded MLPs. And it tends to be a bit more aggressive as a business. So, the higher yield relative to Enterprise reflects a higher risk profile. For conservative investors, the extra yield probably won't be worth the added risk. But if you can handle a little uncertainty, you may want to consider Energy Transfer. The distribution is likely to survive the next energy downturn, given the repositioning that occurred during the last energy downturn. ### Related Stocks - [ET.US](https://longbridge.com/en/quote/ET.US.md) - [XOM.US](https://longbridge.com/en/quote/XOM.US.md) - [CVX.US](https://longbridge.com/en/quote/CVX.US.md) - [EPD.US](https://longbridge.com/en/quote/EPD.US.md) - [ET-I.US](https://longbridge.com/en/quote/ET-I.US.md) ## Related News & Research - [Energy Transfer (ET) Stock Still Looks Like A Bargain As Earnings Support It](https://longbridge.com/en/news/296393654.md) - [Crescent Grove Advisors LLC Sells 79,309 Shares of Energy Transfer LP $ET](https://longbridge.com/en/news/296456417.md) - [Massive Put Options Trading in Bank of NY Mellon - Out-of-the-Money 3.33% Yield](https://longbridge.com/en/news/296256958.md) - [Energy Transfer just raised its 2026 guidance. Is the stock still a buy?](https://longbridge.com/en/news/296027523.md) - [Here's How Much $100 Invested In Energy Transfer 5 Years Ago Would Be Worth Today](https://longbridge.com/en/news/295716610.md) --- > **Disclaimer: This article is for reference only and does not constitute any investment advice.**