Is Ultra-High-Yield Energy Transfer a Buy Now?

Energy Transfer (NYSE: ET) is currently being scrutinized as a potential buy, despite its troubling past. The company's history includes a failed acquisition attempt of Williams (NYSE: WMB) in 2006, which led to the issuance of convertible securities aimed at protecting insiders from a dividend cut. In the midst of the 2020 oil downturn, Energy Transfer reduced its distribution by half, aiming to bolster its balance sheet and reposition the business.

Now, Energy Transfer is on a different trajectory, with a focus on slow and steady growth. The company aims to increase its distribution by 3% to 5% per year, similar to peer Enterprise Products Partners (NYSE: EPD), which has consistently increased its distribution annually for 28 years. While Enterprise offers a more attractive 5.6% yield, Energy Transfer boasts a higher 6.3% yield.

However, Energy Transfer's higher yield comes with greater risk, as the company has a more complex business structure with two other publicly traded master limited partnerships. For risk-tolerant investors, the potential 12.5% higher income from Energy Transfer may be worth the added risk. Nonetheless, more conservative investors may prefer Enterprise for its reliable dividend growth history.

Despite its past, Energy Transfer appears to have repositioned itself as a more attractive income investment today.