Pipeline companies continue to be in a strong position despite the current disruptions in the energy markets. These companies operate as toll-road businesses, meaning that energy prices have a moderate direct impact on their results. Additionally, the demand for natural gas is on the rise, driven by increased power consumption due to artificial intelligence (AI) technologies, as well as export demands from Mexico and for LNG to Asia and Europe.
Here are four pipeline stocks that are worth considering for long-term investment:
1. Energy Transfer (NYSE: ET): Energy Transfer operates one of the largest integrated midstream systems in the country, with a focus on pipeline, storage, and processing assets. The company is well-positioned in the Permian Basin, which is a prolific oil basin in the U.S. with low breakevens. Energy Transfer has significant growth opportunities, with plans to increase its growth capital expenditures from $3 billion to $5 billion. One of its key projects is the Hugh Brinson Pipeline, which will support the growing power demand in Texas driven by AI.
2. Enterprise Products Partners (NYSE: EPD): Enterprise Products Partners has a track record of increasing its distribution for 26 consecutive years. The company is also well-positioned in the Permian Basin and has ramped up its growth capex. It plans to spend between $4 billion and $4.5 billion in growth projects this year, with a focus on projects in the Permian Basin.
3. The Williams Companies (NYSE: WMB): Williams owns the valuable Transco natural gas pipeline system, which spans from Appalachia to the Gulf Coast. The company has several expansion projects in the pipeline, driven by utilities transitioning from coal to natural gas. Williams currently offers a 3.5% yield and plans to grow its dividend by more than 5% this year.
4. Kinder Morgan (NYSE: KMI): Kinder Morgan plays a vital role in the U.S. midstream sector, with a significant presence in the Permian Basin and Texas. The company is seeing increased growth opportunities in natural gas demand, with a project backlog of $8.8 billion. Kinder Morgan currently offers a 4.5% yield and has improved its balance sheet over the years.
Before investing in Energy Transfer, it’s important to consider other potential investment opportunities. The Motley Fool Stock Advisor recently identified the 10 best stocks for investors to buy now, which could potentially yield significant returns in the future.
In conclusion, pipeline companies remain well-positioned for growth despite the current energy market disruptions. Investing in companies like Energy Transfer, Enterprise Products Partners, The Williams Companies, and Kinder Morgan could provide long-term value and growth potential for investors.
