Here's Why Energy Transfer Stock Is a Buy Before May 6

President Donald Trump's unpredictable tariffs drove many investors from stocks toward more conservative investments over the past few months. However, many panicked investors tossed out the babies with the bathwater during that washout, and many stocks that were actually well-insulated from tariffs were unfairly crushed.

One of those stocks was Energy Transfer (NYSE: ET), which will release its next earnings report on May 6. I'll explain why it's a tariff- and recession-resistant investment and worth accumulating today as the broader market swoons.

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It's resistant to tariffs and a global recession

Energy Transfer is a midstream company that provides pipeline, storage, and terminalizing services for natural gas, natural gas liquids (NGLs), crude oil, and refined products. By building that transportation infrastructure, it serves as a "toll-road operator" between upstream extraction companies and downstream refining companies. Energy Transfer operates more than 125,000 miles of pipeline across 44 states, and its NGL exports account for about a fifth of the global market.

Economic downturns can hurt upstream and downstream companies by reducing oil and natural gas prices. However, midstream pipeline companies generally aren't affected by those price swings because they simply collect the tolls on its infrastructure. That makes Energy Transfer an ideal stock to hold during these uncertain times.

Its headwinds are dissipating

Energy Transfer faced some protests from government regulators, environmental organizations, and Native American tribes over safety and territorial concerns in recent years. A major flashpoint for those conflicts was the Dakota Access Pipeline, in which Energy Transfer owns a 38.2% stake, during its construction in 2016 and 2017.

However, the Trump Administration wants domestic energy companies to ramp up their production of oil, natural gas, and other fossil fuels to reduce the country's dependence on overseas resources. The North Dakota Supreme Court also recently ordered Greenpeace, which actively protested the construction of the Dakota Access Pipeline, to pay Energy Transfer $660 million in damages. Those developments indicate that the company's toughest regulatory and environmental headwinds are dissipating.

Its tailwinds are accelerating

Meanwhile, the soaring energy needs for artificial intelligence (AI) and cloud-oriented data centers should generate strong tailwinds for Energy Transfer and other pipeline companies. Energy Transfer is rapidly expanding its capacity across the Permian Basin and recently struck a deal with CloudBurst to pipe natural gas to its flagship AI-oriented data center campus in Central Texas.

It's generating stable earnings growth

Energy Transfer is a master limited partnership (MLP), which merges the tax advantages of a private partnership with the liquidity of a public-traded stock. MLPs report their profits through their earnings per unit (EPU) instead of earnings per share (EPS).

From 2014 to 2024, Energy Transfer's revenue expanded at a compound annual growth rate (CAGR) of 4% as its EPU rose at a CAGR of 8%. From 2024 to 2027, analysts expect the company's revenue and EPU to increase at a CAGR of 5% and 9%, respectively.

It pays an attractive and sustainable dividend

MLPs generally pay out most of their EPU as dividends. Energy Transfer has raised its dividend annually for 12 consecutive years. It spent nearly 100% of its EPU on its dividends over the past 12 months and pays a hefty forward yield of 8%. By comparison, industry peer Kinder Morgan pays a forward dividend yield of 4.6%.

Energy Transfer trades at a low valuation

At $16, the stock trades at just 11 times this year's EPU. That low valuation, along with its high yield and resilient business model, should limit Energy Transfer's downside potential. Kinder Morgan, which is growing slightly faster, still trades at 21 times its forward EPU.

Insiders are net buyers

Energy Transfer isn't an exciting stock, but it's a great safe-haven play for uncertain times. As long as it gives a stable earnings report on May 6 and follows up with a decent outlook for the domestic energy sector, its stock should stay stable.

That might be why Energy Transfer's insiders bought seven times as many shares as they sold over the past 12 months. Kinder Morgan's insiders sold 18 times -- as many shares as they bought during the same period.

That warmer insider sentiment supports the idea that Energy Transfer is an undervalued dividend play. If you're looking for a reliable safe-haven stock to buy today, Energy Transfer checks all the right boxes.

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Leo Sun has positions in Energy Transfer. The Motley Fool has positions in and recommends Kinder Morgan. The Motley Fool has a disclosure policy.