As 2026 approaches, investors are weighing Energy Transfer (ET) and Enterprise Products Partners (EPD) for their dividend sustainability and growth potential in the midstream energy sector. Both companies offer yields above 7%, but divergent cash flow dynamics and capital allocation strategies may determine long-term outperformance.
- Energy Transfer offers a 7.8% dividend yield with a 89% payout ratio
- Enterprise Products Partners yields 7.3% with a 76% payout ratio, indicating stronger cash flow coverage
- ET’s debt stands at $56 billion with a 5.2x EBITDA leverage ratio
- EPD has $29 billion in debt and a 3.9x EBITDA leverage ratio
- EPD has committed to 3% annual distribution growth through 2027
- Both companies expect $3.8B–$4.2B in distributable cash flow in 2026
Energy Transfer and Enterprise Products Partners stand as two of the largest publicly traded midstream energy firms, both operating extensive pipeline networks across the U.S. and delivering high yields to income-focused investors. ET currently offers a dividend yield of 7.8% with a payout ratio of 89% of distributable cash flow, while EPD maintains a 7.3% yield and a 76% payout ratio, reflecting stronger cash flow coverage. These metrics suggest EPD may have more breathing room for future distributions, especially amid volatility in commodity prices and regulatory scrutiny. Energy Transfer has been pursuing aggressive growth through acquisition and expansion projects, including the 2024 completion of the Lone Star Pipeline, which boosted its natural gas gathering capacity by 160,000 barrels per day. However, its debt load remains elevated at $56 billion, with a leverage ratio near 5.2x EBITDA. In contrast, Enterprise Products Partners has a more conservative capital structure, with $29 billion in debt and a leverage ratio of 3.9x EBITDA, positioning it with greater financial flexibility for downturns. Both companies are expected to generate between $3.8 billion and $4.2 billion in annual distributable cash flow in 2026, but EPD has committed to a 3% annual distribution growth target through 2027, supported by its diversified asset base and long-term contracts. ET has not set a formal growth target, relying instead on organic projects and asset sales to maintain payouts. Market analysts note that EPD’s lower leverage and longer-term contract visibility may provide a margin of safety in a rising rate environment. Investor sentiment is shifting toward stability and predictability in yield, favoring EPD’s consistent execution and disciplined capital management. While ET may offer a higher current yield, its higher payout ratio and financial risk could limit its ability to maintain or grow distributions over the next two years.