Key Points
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Energy Transfer offers a juicy distribution that significantly boost total returns over the long term.
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The midstream energy leader’s growth prospects also look good.
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Although Energy Transfer probably won’t turn $10,000 into $1 million, it could still be a moneymaker for investors.
Energy Transfer LP (NYSE: ET) has delivered a total return of more than 250% over the last five years. This performance has absolutely trounced that of the S&P 500 (SNPINDEX: ^GSPC).
The midstream energy leader is already making money for unitholders in 2026, jumping roughly 17% in less than four months. The future for Energy Transfer looks bright, too. Could investing $10,000 in this high-flying pipeline stock make you a millionaire?
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What it would take
For Energy Transfer to turn $10,000 into a cool $1 million, the stock would have to deliver a 100x return. I think we can safely rule out this happening over a short period of time. But what about over the long term, maybe 30 years?
The compound annual growth rate (CAGR) needed for a 100x return over 30 years is roughly 16.6%. Reinvesting distributions could help get part of the way to this level. Energy Transfer’s forward distribution yield currently tops 7%. The company also expects to increase the distribution by 3% to 5% each year.
Getting the remaining 16.6% of the CAGR could be challenging, though. Consider that Energy Transfer posted record growth in crude oil transportation and in natural gas liquids (NGL) fractionation and transportation. The highest growth in these areas was only 6%.
Sure, Energy Transfer has solid long-term growth prospects. The demand for natural gas is expected to rise, driven in part by the continued surge in the construction of data centers. Energy Transfer has multiple long-term agreements to supply natural gas to three data centers operated by Oracle (NYSE: ORCL), CloudBurst, and Fermi America (NASDAQ: FRMI).
However, it’s a stretch to predict that the midstream energy company will consistently generate the growth needed to turn $10,000 into $1 million over three decades. An investment of $10,000 when Energy Transfer first traded publicly 20 years ago would be worth only around $133,000 today.
A pipeline over green grass.
Image source: Getty Images.
A moneymaker, even if not a millionaire-maker
Energy Transfer probably won’t be a millionaire-maker (at least, without a much larger investment than $10,000). However, the stock could still be a moneymaker.
The limited partnership currently enjoys the strongest position in its history. It’s generating ample free cash flow to sustain and grow distributions. As previously mentioned, the company’s long-term growth prospects appear strong. Energy Transfer is also invested in capital projects to capitalize on its growth opportunities.
A stock doesn’t have to make you a millionaire to be a good pick. Energy Transfer is a good pick, in my opinion.
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Keith Speights has positions in Energy Transfer. The Motley Fool has positions in and recommends Oracle. The Motley Fool has a disclosure policy.
