2 No-Brainer High-Yield Energy Stocks to Buy Right Now, Starting With Energy Transfer

Energy Transfer reported Q2 net income of $2.09B, up 80.1% year over year, and raised its 2026 adjusted EBITDA guidance to $18.8B–$19.1B from $18.2B–$18.6B; distributable cash flow rose 32% to $2.59B. Enterprise Products Partners posted record Q2 results, with net income up 28% to $1.8B, distributable cash flow up 21% to $2.3B, and adjusted EBITDA up 17% to $2.8B. The article highlights their 6.69% and 5.99% dividend yields, respectively, and argues that fee-based contracts and exposure to AI-related power demand support the partnerships.

Analysis

The investment case is less “AI growth” than contracted-volume optionality: data-center load matters to ET and EPD only when it drives gas-fired generation, new pipeline throughput, or LNG/NGL export volumes that convert into durable take-or-pay contracts. The key 1–3 month evidence is not power-demand headlines, but incremental contract announcements, sanctioned capacity, and whether guidance growth is backed by projects with attractive returns. Over 6–18 months, permitting, interconnection delays, and competing generation sources can slow the conversion from forecast load to midstream cash flow.

The article’s valuation comparison using trailing earnings is a weak basis for ranking MLPs; EV/EBITDA, distributable cash flow after growth capex, leverage, and project returns are more decision-useful. Distribution coverage is a cushion, not proof of safety if expansion spending, financing costs, or operating needs rise. Higher rates can also compress yield-oriented MLP valuations even if volumes hold. EPD’s longer distribution-growth record supports a relative-quality case, but does not establish that either yield is mispriced.

Contrarian risk: investors may be capitalizing broad AI power forecasts before pipeline-level contracts exist. Gas demand could grow while incremental economics accrue to generators or other infrastructure rather than these partnerships. Verify contract mix, leverage and maturities, growth-capex commitments, and project-level returns before treating recent EBITDA growth as structural.

Key Decisions for Investors

• Do not chase either partnership solely on AI headlines. Treat near-term data-center demand as an unconfirmed catalyst until it appears in contracted volumes, project approvals, or guidance.
• For a lower-beta income expression, prefer EPD over ET only if current relative valuation does not already price in its longer distribution-growth record; compare EV/EBITDA, leverage, and post-capex DCF rather than headline P/E.
• Consider a staged EPD-over-ET relative-value position only after checking the current valuation spread and balance-sheet metrics. The thesis is falsified if EPD’s relative valuation premium expands without stronger contracted growth or post-capex cash generation.
• Reassess after the next results and material project announcements: watch distribution coverage after growth capex, debt metrics, contract-backed throughput additions, and guidance. A deterioration in coverage or rising financing needs would outweigh the AI-demand narrative.