For dividend investors, the big attraction with Energy Transfer (ET 0.91%) today is its lofty 7.8% distribution yield. Before you jump at that yield, however, you should consider some historical facts.

Here's a quick primer on this midstream master limited partnership (MLP) to get you started.

What does Energy Transfer do?

From a big picture perspective, Energy Transfer operates midstream businesses. The plural "businesses" is important here. It owns and operates midstream assets, like pipelines. It collects fees from the companies that use its services, which tends to provide reliable cash flows through the energy cycle. That's the core of Energy Transfer's business.

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However, in addition to its midstream activities, it also acts as the general partner to two other publicly traded master limited partnerships. Sunoco LP distributes motor fuel. USA Compression Partners rents out compression machinery that helps to increase the throughput of pipelines. On top of this, it is also involved in the liquified natural gas space. Energy Transfer is not a simple business to understand. For instance, Sunoco and USA Compression Partners can be more cyclical than Energy Transfer's in-house operations. So there's a little extra volatility here.

What has Energy Transfer done?

If you are going to buy Energy Transfer you need to be willing to take on, and spend the extra effort tracking, a fairly complex business. But there's some other things to consider. The most recent being the 50% distribution cut in 2020. The purpose of the cut, which happened to coincide with a difficult period for the energy industry, was to strengthen the MLP's balance sheet.

That's not a bad thing, but there are two issues to consider. First, the need to reduce leverage means that management allowed Energy Transfer to get overleveraged in the first place. And, second, the pandemic period cut came right when unitholders probably needed the income that they were collecting from their investments. It was a very bad look for Energy Transfer and the units fell sharply.

Data by YCharts.

Go back a little further and you'll find an even more interesting story unfolds. Energy Transfer's units skyrocketed up until roughly 2016. That was when the stock plunged and, since that point, it hasn't managed to break above $20 per unit. That period was another weak patch for oil prices. And while the distribution wasn't cut, there was a, perhaps, even more troubling event.

Back then, Energy Transfer agreed to buy peer Williams but quickly got cold feet. It warned that completing the acquisition would either require taking on huge amounts of debt or cutting the dividend, and perhaps both. It managed to get out of the deal, but that process involved selling convertible securities that appear like they would have protected the CEO, who bought a lot of those convertibles at the time, from a dividend cut if the deal had gone through as planned. That CEO is currently the chairman of the board.

There are other midstream energy businesses that don't have this kind of troubling history. For example, Enterprise Products Partners (EPD -0.02%) has increased its distribution annually for 26 years. Enbridge (ENB -0.09%) has hiked its dividend for 30 years. And neither has anything similar to the Williams issue in their pasts. Enterprise is yielding 7.1% and Enbridge is yielding 5.8%. Although those yields are lower, it may be worth the peace of mind their stronger operating histories provide.

Is Energy Transfer worth buying under $20?

If what you care about most is buying the highest yields, then you might be tempted to buy Energy Transfer. But if you care about dividend consistency, you'll probably be better off looking elsewhere. And if you want to own a business that places its shareholders' interests first, you might also be better off considering other choices. A good place to start is with Energy Transfer's peers, Enterprise and Enbridge.