Is Energy Transfer Stock a Buy?

Until a few days ago North American midstream giant Energy Transfer (NYSE: ET) was sporting a huge 19% distribution yield. That level was Wall Street's way of telegraphing a distribution cut, which showed up on Oct. 26. Even after a 50% haircut, though, investors might be salivating at the still high 10.5% yield. Here are some key factors to think about before you buy Energy Transfer for its huge yield.  

While it may seem like a lifetime ago given the current headwinds posed by COVID-19, in 2015 Energy Transfer agreed to buy peer Williams Companies. However, the energy industry was facing material headwinds at the time, and Energy Transfer decided that it wanted out of the deal. Essentially, if it chose to complete the merger, it would have had to either take on a huge amount of debt or cut its distribution (or maybe even both). 

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Source Fool.com