Energy Transfer and Western Midstream have high yields and growing distributions.
If you’re looking for high-yield stocks that can provide you with passive income and have solid price appreciation potential, the midstream master limited partnership (MLP) space is the place to look. MLPs come with some extra paperwork at tax time, but much of their distribution income is often deemed a return of capital and is thus tax-deferred, lowering your cost basis. This essentially means you don’t have to pay taxes on this income until you sell the stock.
Meanwhile, the midstream industry as a whole is in perhaps the best financial shape it has ever been, while its stocks are trading well below the 13.7 times enterprise value (EV)-to-EBITDA multiple the group traded at between 2011 and 2016. Most MLPs have also eliminated past incentive distribution rights (IDRs), which were very shareholder-unfriendly, and the group has solid growth prospects ahead, given increasing demand for natural gas stemming from artificial intelligence (AI) and liquefied natural gas (LNG) exports.
Given these stocks’ valuations and outlooks, investors can start with a larger investment amount, such as $10,000, to begin generating robust passive income today.
Image source: Getty Images.
Energy Transfer (8% yield)
Energy Transfer (ET 1.43%) owns one of the largest integrated midstream systems in the U.S., and the company is currently in growth mode, given the attractive opportunities it is seeing. With a strong position in the Permian Basin, one of the country’s most cost-effective sources of natural gas, it is experiencing robust project demand tied to the AI data center build-out.
Today’s Change
(-1.43%) $-0.24
Current Price
$16.59
Key Data Points
Market Cap
$58B
Day’s Range
$16.56 – $16.92
52wk Range
$14.60 – $21.45
Volume
14M
Avg Vol
14M
Gross Margin
12.85%
Dividend Yield
7.81%
The company currently has two major pipeline projects to transport natural gas away from the Permian to areas with high demand, as well as multiple interconnects with data centers and power companies. It currently has budgeted $4.6 billion in growth capital expenditures (capex) this year, and $5 billion for 2026, with expected mid-teens returns on its spending.
At the same time, the company is financially healthy. Its leverage is toward the low end of its targeted range, and it has the highest percentage of take-or-pay contracts in its history, which ensures it receives payment regardless of whether customers use its services. In addition, it had a 1.7 times distribution coverage ratio last quarter based on its distributable cash flow, which is operating cash flow minus maintenance capital expenditures, and it expects to raise its distribution by a 3% to 5% annual clip moving forward.
Despite its strong financial position and solid growth outlook, the stock trades at a forward EV/EBITDA multiple of just 7.6 times 2026 analyst estimates for $17.1 billion in adjusted EBITDA. That’s a bargain.
Western Midstream (9.3% yield)
When yields start nearing double digits, it can sometimes be a warning sign, but that’s not the case with Western Midstream Partners (WES 1.37%). Its distribution is solidly covered by its free cash flow, and the company actually has one of the best balance sheets in the midstream space, with leverage of just 2.8 times at quarter-end. Meanwhile, last quarter it turned in record EBITDA and raised its full-year guidance.
Western Midstream Partners
Today’s Change
(-1.37%) $-0.54
Current Price
$38.79
Key Data Points
Market Cap
$16B
Day’s Range
$38.78 – $39.43
52wk Range
$33.60 – $43.33
Volume
906K
Avg Vol
1.6M
Gross Margin
53.34%
Dividend Yield
9.17%
The company is currently making a big push in the produced water infrastructure business. It just completed the acquisition of Aris Water Solutions, which operates one of the largest produced water solutions businesses in the prolific Delaware Basin. It is also building out the Pathfinder Pipeline, which will transport produced water for disposal from its North Loving natural gas facilities. And it’s expanding North Loving with a second train. Both projects are expected to come online in the first half of 2027 and should be nice growth drivers.
Despite its high yield, Western is still looking to grow its distribution at a mid-single-digit pace. Meanwhile, the stock is attractively valued, trading at a forward EV/EBITDA multiple of 8.1 based on 2026 analyst EBITDA estimates of $2.79 billion.
