Key Points
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Energy Transfer set several records last year.
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The company enters 2026 in a strong financial position.
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It expects its growth rate to accelerate this year.
Energy Transfer (NYSE: ET) recently reported its fourth-quarter and full-year results for 2025. The master limited partnership (MLP) set several volume records in the fourth quarter and delivered record adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) for the year. It also generated robust distributable cash flow, which more than covered its steadily rising cash distribution (7.2% current yield).
The midstream giant has lots of fuel to continue growing in 2026, putting its high-yielding payout on rock-solid ground. As a result, an investment in the MLP (which sends investors a Schedule K-1 Federal tax form) is an excellent way to generate a growing stream of passive income.
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A record year
Energy Transfer generated nearly $4.2 billion of adjusted EBITDA during the fourth quarter, an 8% increase from the prior-year period. The company also produced over $2 billion in distributable cash flow, up 3% year over year. That easily covered the nearly $1.2 billion it distributed to investors during the quarter.
The pipeline company benefited from strong volume growth across its diversified platform, fueled by healthy market conditions and recently completed expansion projects. Natural gas liquids (NGL) and refined product terminal volumes and NGL exports both surged 12% in the fourth quarter. Meanwhile, the partnership set records for NGL fractionation volumes (up 3%) and crude oil transportation volumes (up 6%).
For the full year, Energy Transfer generated a record $16 billion in adjusted EBITDA, up 3.2% year over year. The MLP also produced almost $8.2 billion in distributable cash flow, more than covering the $4.6 billion it distributed to investors. The company’s robust cash flows enabled it to increase its distribution every quarter last year. It has grown the payout by over 3% in the last 12 months. The company’s healthy coverage level allowed it to retain over $3.6 billion in cash to reinvest in growth projects. That enabled it to maintain a strong balance sheet.
An acceleration in 2026
Energy Transfer expects to generate between $17.5 billion and $17.9 billion of adjusted EBITDA this year. That’s a 9% to 12% increase from 2025’s level. It’s also up from the company’s initial guidance range of $17.3 billion to $17.5 billion.
The main factor fueling the guidance boost is the acquisition of J-W Power Company by its affiliated MLP USA Compression. Additionally, Energy Transfer’s other affiliated MLP, Sunoco, closed its $9.1 billion purchase of Parkland late last year, which is a big driver of its growth acceleration in 2026.
In addition, Energy Transfer expects to benefit from the ramp-up and completion of several expansion projects in 2026. Notable projects include its Nederland Flexport NGL expansion, the Mustang Draw I and II gas processing plants, the Hugh Brinson Pipeline Phase I, and natural gas pipeline projects supporting data centers in Texas. The MLP expects to invest over $5 billion to fund growth capital projects in 2026.
A bankable income stream
Energy Transfer delivered record earnings last year, supported by strong volume growth across the partnership. The MLP expects to set more records this year, fueled by acquisitions at its affiliates and a long list of organic expansion projects. This growing cash flow will enable the MLP to continue increasing its high-yielding payout, making it an ideal passive income investment.
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Matt DiLallo has positions in Energy Transfer. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.