Finder is committed to editorial independence. While we receive compensation when you click links to partners, they do not influence our opinions or reviews. Learn how we make money.

Investing in pipeline stocks

Dividends are common perks, but protests can sideline projects and hurt profits.

Posted

Fact checked

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.

What are pipelines?

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:

  • Gathering. These lines gather products from wells and transport them to processing plants.
  • Feeder. These lines transport oil, gas and liquids from storage tanks and processing plants to transmission pipelines.
  • Transmission. These large pipelines can span more than three feet wide and are responsible for carrying oil, gas and natural gas liquids across state lines and country borders for processing or storage.
  • Distribution. These pipelines are responsible for distributing natural gas to homes and businesses.

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.

Why invest in pipelines?

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.

Risks of investing in pipeline stocks

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.

Pipeline stocks

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.

What ETFs track the pipeline category?

Exchange-traded funds that include pipeline companies typically track multicap energy master limited partnerships (MLPs).

  • Alerian MLP ETF (AMLP)
  • Energy Select Sector SPDR Fund (XLE)
  • ETRACS Alerian MLP Infrastructure Index ETN (MLPB)
  • Global X MLP & Energy Infrastructure ETF (MLPX)
  • iShares Global Energy ETF (IXC)
  • UBS E-TRACS Alerian MLP Infrastructure ETN (MLPI)

Compare trading platforms

Before you can invest in pipeline stocks, you’ll need a brokerage account. Review your options below.

Name Product Available asset types Stock trade fee Option trade fee Annual fee
Vanguard
Stocks,Mutual funds,ETFs,Forex
$0
$1
$20 per year
Get a personal advisor when you open an account with at least $50,000.
Robinhood
Stocks,Options,ETFs,Cryptocurrency
$0
$0
0%
Make unlimited commission-free trades in stocks, funds, and options with Robinhood Financial.
Interactive Brokers
Stocks,Bonds,Options,Mutual funds,Index funds,ETFs,Forex,Futures,Cash
$0
$0 + $0.65/contract, $1 minimum
0%
IBKR Lite offers $0 commissions, and IBKR Pro offers advanced tools for professional traders.
TD Ameritrade
Stocks,Bonds,Options,Mutual funds,ETFs,Forex,Futures
$0
or $25 If it is broker-assisted
$0 + $0.65/contract,
or $25 Broker-assisted
TD Ameritrade features $0 commission for online stock, but watch out for high short-term ETF and broker-assisted trading fees.
Tastyworks
Stocks,Options,ETFs,Futures
$0
Stocks & ETFs: $1/contract to open, $0 to close, $10 max/leg
Futures: $2.50/contract to open, $0 to close
0%
Trade stocks, options, ETFs and futures on mobile or desktop with this advanced platform.
loading

Compare up to 4 providers

Disclaimer: The value of any investment can go up or down depending on news, trends and market conditions. We are not investment advisers, so do your own due diligence to understand the risks before you invest.

Bottom line

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.

Before you invest, find the right brokerage account that fits your investment goals.

Frequently asked questions

Ask an Expert

You are about to post a question on finder.com:

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder.com provides guides and information on a range of products and services. Because our content is not financial advice, we suggest talking with a professional before you make any decision.

By submitting your comment or question, you agree to our Privacy and Cookies Policy and finder.com Terms of Use.

Questions and responses on finder.com are not provided, paid for or otherwise endorsed by any bank or brand. These banks and brands are not responsible for ensuring that comments are answered or accurate.
Go to site