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Investing in pipeline stocks is a unique opportunity to buy into the profitability of the oil and gas sector. But public opposition to pipeline infrastructure has the potential to interrupt projects and halt construction efforts.
Pipelines are the physical structures responsible for transporting natural gas, crude oil, natural gas liquids, petroleum and petrochemicals from production centers to refineries, docks, terminals, power plants and consumers. They are a core component of the oil and gas industry and without their infrastructure, the system would grind to a halt.
Pipelines can be divided into four subcategories:
Pipeline stocks are stocks from companies that build, operate or maintain energy pipelines. Generally, there are two types of companies in this space: pipeline corporations and master limited partnerships (MLPs). Both are viable investment opportunities.
There are many stock options for investors ready to buy into the pipeline category. Select a company to learn more about what they do and how their stock performs, including market capitalization, the price-to-earnings (P/E) ratio, price/earnings-to-growth (PEG) ratio and dividend yield. While this list includes a selection of the most well-known and popular stocks, it doesn't include every stock available.
Exchange-traded funds that include pipeline companies typically track multicap energy master limited partnerships (MLPs).
The US is home to the largest pipeline network in the world. And that network is poised for growth. From 2019 to 2025, US oil production is projected to grow by 46%. And this growth will require more pipeline infrastructure.
While it’s true that we’ve begun to experience a global shift towards green energy, we’re far from eliminating our reliance on gas and oil. Plus, many pipeline companies pay dividends, making pipeline stocks a practical portfolio addition for buy and hold investors.
The profitability of pipeline companies depends on the price of oil and gas. And oil and gas prices can be unstable.
Pipeline companies get paid based on the amount of gas and oil they move. When the price of these commodities falls, drilling companies cut back their activity, well output declines and less oil and gas flows through pipeline infrastructures.
Another risk for investors to consider before buying into pipeline stocks is the rising opposition to new infrastructure. Investors should be aware of the environmental risk it poses.
Namely, pipeline leaks have the potential to contaminate water supplies. Pipeline protests can sideline construction efforts and delay projects, effectively reducing productivity and decreasing profits for companies and shareholders alike.
Before you can invest in pipeline stocks, you’ll need a brokerage account. Review your options below.
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Investors seeking a dividend-paying, long-term investment may find value in pipeline stocks. But profits in this category depend on the price of oil and gas and may be impacted by public opposition.
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