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Energy Transfer Shows Modest Growth Amid Pipeline Challenges

Energy Transfer, a major midstream U.S. company, has seen a 19-year investment grow by 362%. However, potential regulatory hurdles could impact growth. Investors are advised to weigh risks and rewards before investing.

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AI Rating:   6
Revenue Growth and EPS Performance
Energy Transfer's revenue has shown a compound annual growth rate (CAGR) of 4% from 2014 to 2024, while earnings per unit (EPU) increased at a CAGR of 8%. This steady rise indicates a resilient business performance over the years.

Future Projections
Analysts forecast revenue and EPU growth rates to increase to CAGRs of 5% and 12%, respectively, from 2024 to 2027, supported by rising domestic energy production and the growing energy needs of AI and cloud data centers.

Dividend Payout
Energy Transfer utilizes nearly 100% of its EPU for dividends over the last year, showcasing its commitment to returning value to shareholders. This has included 12 consecutive years of annual dividend increases, and it currently offers a high forward yield of nearly 7%, favorable compared to the 10-year Treasury yield of 4.3%.

Regulatory and Environmental Challenges
Despite its growth, the company faces significant opposition from government regulators and advocacy groups regarding its pipeline projects. The ruling that requires Greenpeace USA to pay Energy Transfer over $660 million for the Dakota Access Pipeline protests may alleviate some future protest risks. However, ongoing regulatory scrutiny could pose risks for upcoming expansions.

Long-term Outlook
If Energy Transfer can fulfill analysts’ expectations and maintain its trajectory, its stock price could rise around 170% by 2035, translating to about $50.70 per unit. However, for investors seeking rapid gains, Energy Transfer may not be the ideal choice. Conversely, its reliability as a dividend stock aligned with America's energy demands makes it an appealing option for certain investors.
Stocks:  ET