Western Midstream Partners vs Energy Transfer: Which MLP Distribution Should You Choose?

Income Comparison: The Yield Spread Matters

When evaluating master limited partnerships in the energy midstream sector, distribution yield is often the primary consideration for income-focused investors. Energy Transfer currently distributes cash at an 8.1% yield, making it an attractive income source. However, Western Midstream Partners offers a notably higher payout at 9.3%, representing a 120 basis point advantage for those prioritizing immediate returns.

Energy Transfer, one of America’s most extensive energy infrastructure platforms, operates approximately 140,000 miles of pipelines transporting crude oil, natural gas, liquids, and refined products. The company complements this with processing facilities and export terminals. Western Midstream Partners, while smaller in geographic reach, maintains a concentrated portfolio focused on premier midstream assets.

Financial Health: Both Companies Display Different Strengths

The financial foundation supporting each distribution tells an important story about sustainability and growth potential.

Energy Transfer’s improving profile has reached a historic turning point. Year-to-date distributable cash flow reached $6.2 billion through Q3, covering the $3.4 billion in distributions by a comfortable 1.8x coverage ratio. The company’s leverage ratio has descended into the lower portion of its 4.0-4.5x target band, demonstrating meaningful balance sheet improvement from prior years.

Western Midstream’s financial fortress appears even more conservative. The company maintains a 2.8x leverage ratio—substantially lower than Energy Transfer—while generating sufficient operating cash flow to cover distributions, fund capital projects, and retain quarterly free cash flow of $42 million during Q3. The $355 million quarterly distribution was fully supported while simultaneously investing $173 million in growth initiatives.

Distribution Growth Trajectories: The Acceleration Potential

Both MLPs commit to distribution expansion, but at different paces and with different catalysts.

Energy Transfer projects 3% to 5% annual distribution growth, supported by $4.6 billion in 2025 capital spending and $5 billion planned for 2026. The company has identified expansion projects extending through 2029, providing visibility into future distribution increases.

Western Midstream demonstrates more aggressive near-term momentum, having increased its distribution by 13% this year. Management targets low-to-mid single-digit annual growth going forward, though the recently closed $1.5 billion Aris Water Systems acquisition and newly approved Pathfinder Pipeline and North Loving II gas processing projects suggest material upside scenarios beyond the baseline guidance.

Strategic Considerations for Income Investors

Energy Transfer remains a foundational energy infrastructure investment, combining scale, diversification, and improving financial metrics with a sustainable distribution backed by robust cash generation. For investors seeking core midstream exposure with predictable 3-5% annual distribution growth, it presents solid income characteristics.

Western Midstream appeals to those prioritizing maximum current income while retaining optionality for accelerated distribution growth through capital deployment. The lower leverage profile provides strategic flexibility, and recent acquisitions signal management confidence in value-creation opportunities.

Both qualify as quality income vehicles within the MLP universe; the choice depends on whether you prioritize maximum current yield and growth acceleration (Western Midstream) or diversified scale with predictable income (Energy Transfer). Tax considerations around K-1 reporting should also factor into the decision for taxable account investors.