Pipeline companies rallied heavily in November. The natural gas pipeline giant Kinder Morgan (NYSE: KMI) grew by 15.1%, according to data provided by S&P Global Market Intelligence. Meanwhile, master limited partnerships (MLPs) are leading the way Power Pass it on(NYSE: ET)againBusiness Product Partners(NYSE: EPD) both are up more than 20%. Those were big moves for the slow-growth companies best known for paying high-yield dividends.
Two notable catalysts drove the rally forward stock pipes: growth prospects driven by choice and artificial intelligence (AI).
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Stocks rose after the election. I S&P 500(SNPINDEX: ^GSPC) it has gained about 2% since Election Day, driven by hopes that the incoming Trump administration will cut taxes and regulations.
Many energy stocks have rallied, buoyed by hopes that the new administration will follow through on its promise to loosen the chains holding back US energy production. The belief is that the Trump administration will be more open to issuing drilling permits once related to the structure energy infrastructure, such as pipelines and export facilities. That could drive higher production in the coming years. Those rising numbers will benefit mid-sized companies because it has to grow their cash flow.
For example, Energy Transfer CEO Tom Long discussed the outcome of the company's election third quarter conference call. He said, “This industry has gone through a lot in the last four years,” including tough regulations and permit issues.
However, Long sees the incoming Trump administration as the spirit of fresh air. I MLP he believes that with the new administration, it will happen in the end able to move forward with its Lake Charles LNG project. That project has experienced further delays over the past year after a date at the moment Management is temporarily suspended for a new release LNG permissions. Ultimately, moving forward with the project will significantly improve and increase the MLP's growth profile.
Lean management will enable midstream companies to fully capitalize on the potential growth in natural gas demand in the coming years, fueled by AI data centers. The transfer of power has already occurred seeing an increase in interest for additional gas pipeline capacity to support gas-fired power plants and data centers. It was said on the phone, “We've never seen this level of activity from a demand perspective.”
Kinder Morgan founder Richard Kinder made a similar comment on that company's third quarter conference call. He said“In fact, in my decades of experience in the middle ground, I have never seen a large area so rich in opportunities for additional natural gas infrastructure.” The company has already secured several new gas pipeline expansion projects this year and now has $5.1 billion of major projects committed in progress.
Similarly, Enterprise Products Partners noted in its call that it is seeing a lot of incoming inquiries about potential projects that support the increased demand for gas in Texas for data centers and gas-fired power plants. That will add to the $6.9 billion in project MLP hedge funds we already have under construction.
With fewer potential regulatory issues and faster growth prospects ahead, these mid-sized companies could grow rapidly over the next few years. That could give them more money to grow their already high-yielding dividends.
Pipeline companies emerged last month following the election. Investors are asking them to identify opportunities for strong growth, as they have to face several challenges in dealing with the future increase in energy demand. Outside of that circle, many medium-sized companies are still trading appropriate measurements and offer high dividend yields (more than 4% for Kinder Morgan and more than 6% for MLPs). As a result, they still look like compelling investments for those looking for income and growth potential.
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Matt DiLallo holds positions in Energy Transfer, Enterprise Products Partners, and Kinder Morgan. The Motley Fool has positions and recommends Kinder Morgan. The Motley Fool recommends Enterprise Products Partners. The Motley Fool has a policy of disclosure.
Why Kinder Morgan, Energy Transfer, and Enterprise Products Partners Are Up More Than 15% in November was originally published by The Motley Fool
