Better Dividend Stock: Western Midstream vs. Energy Transfer

However, Moreover, These mid companies generate stable cash flow, much of which they pay out to investors

Most investors will ly prefer to own only one of these MLPs, especially due to the potential tax complications associated with the annual Schedule K-1 federal tax forms they send to investors (which is quite significant)

Here's a look at which MLP is the better buy for those seeking sustainable, growing dividend income

Furthermore, Image source: Getty Images

Drilling down into their operations Energy Transfer and Western Mid operate diversified energy mid networks

Western Mid serves the Delaware, DJ, and Powder River basins

Furthermore, It primarily gathers, treats, cesses, and transports natural gas, NGLs, and crude oil, as well as vides water disposal services

Furthermore, It generates fee-based income secured by long-term contracts

Energy Transfer offers broader diversification, as it serves a range of commodities, including natural gas, NGLs, crude oil, and refined ducts, in today's financial world

Energy Transfer's larger, more diversified infrastructure model reduces risk and increases its growth potential (quite telling)

Conversely, There are other notable differences between these MLPs

Energy Transfer, on the other hand, doesn't have a single significant customer or a large controlling holder

At the same time, Instead, the company controls two other MLPs (Sunoco and USA Compression), which supply it with additional income and enhance its growth file

Comparing their financial positions A high dividend yield can sometimes signal financial distress, but that's not the case with these MLPs

Energy Transfer is in the best financial position in its history, given the current landscape

In contrast, Its leverage ratio is now in the lower half of its target range of 4

Nevertheless, Additionally, the MLP generates enough cash to cover its payout by more than two times, viding it with the flexibility to invest in growth jects and make acquisitions

Western Mid also maintains a strong financial position, backed by a leverage ratio currently below 3 (noteworthy indeed)

While Western Mid has a higher payout ratio, it expects to generate sufficient free cash flow this year to cover its capital expenditures with some room to spare, considering recent developments

As a result, it also has ample financial flexibility to make bolt-on acquisitions and apve additional organic expansion jects

Meanwhile, the company has several more expansion jects under development, including its Lake Charles LNG export terminal

Market analysis shows aims to use its financial flexibility for additional organic expansions and accretive bolt-on acquisitions as opportunities arise

These growth investments should drive mid-single-digit cash flow and distribution growth

High-quality, high-yielding investments Western Mid and Energy Transfer offer high-yielding distributions, backed by stable cash flows and strong financial files

As a result, either would be a solid option for those seeking to generate passive income

However, Energy Transfer's greater diversification reduces risk and vides it with more growth potential

In contrast, Those features make it a better choice for investors seeking a sustainable, growing income

The Author Matt DiLallo is a contributing Motley Fool Stock Market Analyst specializing in covering publicly traded companies that pay dividends, especially those in the energy and REIT sectors

He also covers pre-IPO companies, ETFs, and other topics

Prior to The Motley Fool, Matt was Director of Operations for a non-fit group in Pittsburgh and Manager for a religious organization in New York

He holds an MBA and a B

In Biblical Studies from Liberty University

TMFmd19 X @MatthewDiLallo Matt DiLallo has positions in Energy Transfer

The Motley Fool recommends Occidental Petroleum

The Motley Fool has a disclosure policy.