Energy Transfer (ET 0.10%) is popular among income-seeking investors. The master limited partnership (MLP) offers a monster distribution that currently yields 7%. That's well above the S&P 500's dividend yield (1.2%). Further, the company plans to steadily increase its payment each quarter, targeting yearly growth at a 3% to 5% annual rate.

As good as Energy Transfer's income is these days, fellow MLP Western Midstream Partners (WES 0.28%) offers an even bigger yield at 9%. Here's a closer look at this higher-yielding midstream company.

Drilling down into Western Midstream Partners

Western Midstream Partners is an MLP primarily focused on gathering, processing, treating, and transporting crude oil and natural gas from production basins in the Rockies and Texas. It supports the operations of its parent, Occidental Petroleum, and third-party customers. Occidental owns a 44.8% interest in the MLP and 2% of its operating company. The oil company has been slowly monetizing that position to raise cash to repay debt.

The company's midstream assets generate very stable cash flow. Fee-based contracts with Occidental and other customers support 95% of its gas infrastructure and 100% of its crude oil assets, protecting it from commodity price exposure. Most of those contracts are either minimum volume or cost-of-service agreements that protect a significant percentage of its volumes. Overall, Western Midstream is less diversified than Energy Transfer (one of the largest and most diversified midstream companies) while having a similarly stable cash-flow profile (fees supply about 90% of Energy Transfer's earnings).

Western Midstream has a very strong financial profile. The MLP expects its leverage ratio to end the year at 3 times, down from 3.7 times at the end of last year. That's much lower than Energy Transfer, which expects its leverage ratio to be toward the lower end of its 4 times to 4.5 times target range.

The smaller MLP also produces significant free cash flow after capital expenses (nearly $1.2 billion expected this year). That's enough to cover its high-yielding distribution with room to spare (over $100 million in excess free cash flow over the past two quarters). It uses the excess funds to repurchase units and strengthen its balance sheet. Energy Transfer also produces excess free cash after covering its distribution and capital spending. It uses that money to enhance its financial flexibility to continue its midstream consolidation strategy (it has made three acquisitions over the past couple of years).

The fuel to grow

Western Midstream expects to invest $750 million to $850 million on capital projects this year to maintain and expand its midstream infrastructure. It's investing capital to grow its leading midstream services business in the Delaware Basin, including building another natural gas processing plant. It's also expanding its core positions in the DJ and Powder River basins in the Rockies.

The MLP has also made some notable moves to enhance its operations and financial strength over the past several quarters. It sold $790 million of non-core assets earlier this year, including several joint venture assets. Those sales enabled it to recycle capital by paying down debt following its $855 million acquisition of Meritage Midstream Services. That highly accretive acquisition significantly expanded its footprint in the Powder River Basin.

Western Midstream has the financial flexibility to make additional growth-related investments in the future. Those investments would give the MLP even more fuel to grow its distribution. It provided its investors with a monster 52% raise earlier this year after closing the asset sales to repay debt following the Meritage deal. While the company likely won't grow its payout anywhere near that rate in the future, it could deliver distribution growth at or above Energy Transfer's target range.

A compelling alternative

Given its higher yield, Western Midstream enables investors to generate more income than Energy Transfer. The MLP has a similarly strong financial profile and solid growth prospects. Because of that, it can be a good alternative or complement to a position in Energy Transfer for those comfortable with investing in MLPs (which send investors Schedule K-1 Federal Tax Forms each year).