Pipeline Stock List: Collect Reliable Dividends from These Pipeline Stocks
Pipeline Stocks 2017
With the downturn in oil and gas prices in the past several years, the energy sector may not look that attractive. However, one particular group of energy stocks still deserves the attention of income investors, and that’s pipeline stocks. Pipelines play a crucial role in people’s lives and are essential to a large number of industries in our country. In this article, we are going to take an in-depth look at the list of pipelines stocks and see why they are worth conserving for income investors.
Why Pipeline Stocks Are Worth Considering
Before investing in pipeline stocks, it’s important to understand what pipelines are, the different types of pipelines, and the fundamentals of pipeline companies.
Compared to the latest development in the tech sector, pipelines have a rather boring definition. Basically, a pipeline is used to transport material through a pipe. Pipelines can carry many types of stuff, such as oil, natural gas, water, sewage, and even beer. In this article, we are going to focus exclusively on pipelines that transport energy products.
You might not see energy pipelines very often, but they are crucial to our everyday life. Think about it: you fill up your car at your local gas station, but the gasoline may be delivered by a pipeline from a refinery hundreds of miles away. When you turn on the heater for your home—may it be using heating oil, natural gas, or propane, there’s a good chance that it used pipelines at some point before arriving at your house.
And I haven’t even mentioned all the industries that can’t run without energy products. It’s safe to say that pipelines are an essential component of people’s lives and our country’s economy.
Of course, you can also use trucks and trains to move energy products. As a matter of fact, trucks are often used to cover the last few miles to make local deliveries. But when it comes to economic efficiency, as well as safety for long distance transportation of energy products, they simply cannot compete with pipelines.
Pipelines’ critical role in our economy is one of the reasons for investors to consider pipeline stocks. Sure, headwinds from the downturn in commodity prices still make many energy companies look a bit risky. However, people still need to use cars and airplanes to go to places, and they still need to turn up the heater when the weather gets cold. The price of crude oil may continue to fluctuate, but once it is out of the ground, it will need to get to a refinery, and then to a storage terminal before reaching its final destination.
Right now, fossil fuels still dominate energy consumption in the U.S. According to the U.S. Energy Information Administration, fossil fuels were responsible for supplying 81.5% the all U.S. energy consumption in 2015. As long as there are energy products to move, pipelines should be able to see recurring business. (Source: “Fossil fuels still dominate U.S. energy consumption despite recent market share decline,” U.S. Energy Information Administration, July 1, 2016.)
Pipeline Companies Generating Impressive Returns
Compared to others parts of the energy sector, pipelines offer some of the most solid income investment opportunities.
Consider how, for an oil driller, the amount of money they make depends on how much they can sell their output for, which in turn depends on the price of crude. For refineries, while their input is crude, their output—whether it’s gasoline, diesel fuel, heating oil, or asphalt base—is also commoditized. In other words, commodity prices can impact the business of both upstream drillers and downstream refineries.
Pipeline companies, on the other hand, make money by transporting energy products, and the amounts and fees are often predetermined. Because they are not drilling new wells, they don’t have to worry too much about the price of crude.
Pipelines also don’t have to worry about competition. Building a pipeline is not cheap, which creates a natural barrier to entry. Moreover, once a pipeline is put in place, it’s extremely unlikely that the government would grant the approval to someone that wants to lay a competing line. In other words, pipelines operate as monopolies.
By being a price setter rather than a price taker, pipeline companies can generate sizable profits. As a matter of fact, some pipeline stocks are generating double-digit returns on invested capital, even during the downturn in commodity prices.
Furthermore, while pipelines are expensive to build, the costs required to maintain a pipeline once it starts operating is small compared to the cash it generates. This allows pipeline stocks to generously reward their investors.
Now, let’s take a look at the different types of pipeline stocks.
Oil Pipeline Stocks
In the making of many energy products, the first step is extracting crude oil. This can be done through conventional drilling, recovering from oil sands, and hydraulic fracturing, among other means. Once crude oil is out of the ground, it needs to go to refineries.
There are crude oil pipeline stocks that focus primarily on transporting crude oil from producing areas to refineries. For instance, Plains All American Pipeline, L.P. (NYSE:PAA) owns and operates approximately 16,900 miles of crude oil pipelines.
After going through refineries, the next part of the drip is handled by refined product pipelines. There are also companies specializing in them, such as Magellan Midstream Partners, L.P. (NYSE:MMP), which has a 9,700-mile refined products pipeline system with access to nearly 50% of the country’s refining capacity.
Oil and Gas Pipeline Stocks
Other than transporting crude oil and refined petroleum products, pipelines also carry natural gas and natural gas liquids (NGLs). Since natural gas is responsible for supplying nearly one-fourth of all the energy used in the U.S., it shouldn’t be a surprise that there is a large system of pipelines moving them across the country. Right now, there are 300,000 miles of natural gas transmission pipelines and 2.2 miles of utility distribution pipelines. (Source: “At a Glance,” American Gas Association, last accessed May 15, 2017.)
One thing to note for investors looking for a separate list of natural gas pipeline stocks is that many companies that own and operate crude oil pipelines and refined products pipelines also have a natural gas pipeline business. For instance, Spectra Energy, which owned one of the largest natural gas pipeline systems in the U.S., was acquired by energy delivery company Enbridge Inc (NYSE:ENB), which also has a crude oil transportation system.
Pipeline Stocks with High Dividends
One of the things that income investors have been searching for is high-yield stocks. With interest rates being kept artificially low for the most part since the Great Recession, investors rushed towards high-yield dividend stocks. So their stock prices have already been bid up and their yields are no longer that attractive.
Many pipeline stocks have the ability to pay oversized dividends. And because of the downturn in oil and gas prices, some investors walked away from them. As a result, oil and gas pipeline companies can still have very handsome dividend yields.
One thing to note here is that a lot of the high-yield pipeline stocks are structured as master limited partnerships (MLPs). Units of MLPs can trade on stock exchanges, just like shares of publicly listed companies. However, MLPs differ from most companies in that they don’t have to pay tax at the corporate level. In return, MLPs must distribute almost all their profits to investors.
In other words, MLPs can pass the cash generated from their business directly to shareholders. The mandatory distributions, coupled with the lack of corporate taxes, make pipeline MLPs attractive income investments.
Still, keep in mind that not all pipeline stocks are structured as MLPs and not all MLPs are in the pipeline business. For example, there are also MLPs engaged in the exploration and production of oil and gas.
Below is a list of pipeline stocks currently trading in the U.S. stock market.
List of Pipeline Stocks
|Company Name||Ticker Symbol|
|Antero Midstream Partners LP||AM|
|Arc Logistics Partners LP||ARCX|
|Targa Pipeline Partners LP||APL|
|Azure Midstream Partners LP||FISH|
|Blueknight Energy Partners L.P.||BKEP|
|Boardwalk Pipeline Partners, LP||BWP|
|Buckeye Partners, L.P.||BPL|
|Cheniere Energy Partners LP||CQP|
|Cheniere Energy Partners LP Holdings LLC||CQH|
|Columbia Pipeline Group Inc||CPGX|
|Columbia Pipeline Partners LP||CPPL|
|CONE Midstream Partners LP||CNNX|
|DCP Midstream Partners L.P.||DPM|
|DCP Midstream LP||DCP|
|Dominion Midstream Partners, LP||DM|
|El Paso Partners Pipeline L.P.||EPB|
|Enable Midstream Partners LP||ENBL|
|Enbridge Energy Partners L.P.||EEP|
|Energy Transfer Equity L.P.||ETE|
|Energy Transfer Partners L.P.||ETP|
|Franks International NV||FI|
|Genesis Energy, L.P.||GEL|
|Green Plains Partners LP||GPP|
|Holly Energy Partners L.P.||HEP|
|Inergy Midstream LP||NRGM|
|JP Energy Partners LP||JPEP|
|Kinder Morgan Energy Partners L.P.||KMP|
|Kinder Morgan Inc.||KMI|
|Kinder Morgan Management, LLC||KMR|
|Magellan Midstream Partners L.P.||MMP|
|Marlin Midstream Partners LP||FISH|
|NuStar Energy L.P.||NS|
|NuStar GP Holdings, LLC.||NSH|
|Oiltanking Partners L.P.||OILT|
|Oneok Partners L.P.||OKS|
|Pembina Pipeline Corp. Ordinary Shares (Canada)||PBA|
|PennTex Midstream Partners, LP||PTXP|
|Plains All American Pipeline L.P.||PAA|
|Plains GP Holdings LP||PAGP|
|QEP Midstream Partners LP||QEPM|
|Regency Energy Partners L.P.||RGP|
|Shell Midstream Partners, L.P.||SHLX|
|Spectra Energy Partners LP||SEP|
|Tallgrass Energy GP, LP||TEGP|
|Tallgrass Energy Partners LP||TEP|
|Targa Resources Partners L.P.||NGLS|
|TC Pipelines L.P.||TCP|
|Tesoro Logistics L.P.||TLLP|
|Transmontaigne Partners L.P.||TLP|
|Valero Energy Partners LP||VLP|
|Western Gas Partners L.P.||WES|
|Western Refining Logistics LP||WNRL|
|World Point Terminals LP||WPT|
Final Thoughts on Pipeline Stocks
Last but certainly not least, the best pipeline stocks are not always the highest-yielding names. Yes, because of the nature of their business, pipeline companies and partnerships can pay sizable dividends. However, there have been instances where pipeline stocks cut back their payout. Moreover, if the commodity price headwinds persist long enough so that producers further cut their production, it could affect the volume of oil being transported, and that could impact the business of pipelines.
Therefore, being a pipeline stock doesn’t necessarily mean it’s a good dividend stock. As is the case with investing in any types of dividend stocks, it’s crucial to look into a company’s business before making a decision.