Many income-seeking investors are naturally drawn to the energy sector, as energy stocks often offer high dividend yields. However, investing in some energy stocks also comes with certain drawbacks. For example, fluctuations in oil and gas prices can sometimes reduce the reliability of their cash flows and dividends.
That said, not all energy stocks carry this burden. Midstream energy companies are not affected by oil and gas prices. Their pipelines function like toll roads, charging fees to transport liquids regardless of how oil and gas prices fluctuate. Overall, if you like energy stocks, these two pipeline stocks, which can be held indefinitely to generate a continuous stream of income, may be worth your attention.
Enbridge (ENB) is the largest midstream energy stock by market capitalization. The company operates the longest (and most complex) crude oil transmission network in the world, with 18,085 miles of pipelines in the United States and Canada. Enbridge also operates 70,273 miles of natural gas pipelines, including its DCP Midstream assets, a joint venture with Phillips 66 (PSX).
But Enbridge’s impressive story is not limited to its pipeline network. The company is also a utility stock and, by volume, the largest natural gas utility company in North America. The company simultaneously invests in renewable energy, with a renewable power generation capacity of approximately 7.2 gigawatts, including projects in operation or under construction.
Like many pipeline stocks, Enbridge offers an attractive dividend. Its current dividend yield is approximately 5.3%. Even more impressive, the company has increased its dividend for 31 consecutive years. Enbridge management has identified $50 billion in growth opportunities through 2030. Company leadership has proven its provided data to be reliable, as the company has met or exceeded management’s financial guidance for 20 consecutive years.
Want pipelines? Energy Transfer (ET) boasts an enormous pipeline network—140,000 miles spanning the entire United States. This midstream energy company focuses particularly on the Permian Basin region in West Texas and the energy hub area near Houston, Texas.
Energy Transfer is a top choice for many income investors. Its forward dividend yield exceeds 7%. This master limited partnership (MLP) continues to maintain strong distribution coverage. Management’s target is annual distribution growth of 3% to 5%.
This pipeline stock may also attract value investors. Energy Transfer’s units trade at just 11.4 times forward earnings and 0.76 times trailing twelve-month sales.
In terms of growth, this stock also delivers. Energy Transfer has a robust backlog of capital projects. Benefiting from surging demand driven by artificial intelligence (AI), the company is enjoying strong growth, having signed long-term agreements to supply natural gas to three Oracle (ORCL) data centers.
Summary: Enbridge, with its vast pipeline network, diversified utility and renewable energy holdings, and a 31-year record of consecutive dividend increases, demonstrates long-term stable operational capability. Energy Transfer, with its dividend yield exceeding 7%, relatively low valuation levels, and new projects benefiting from AI-driven demand growth, attracts the attention of both income and value investors. These two stocks each have their unique characteristics and are suitable for investors seeking long-term holding and a continuous stream of cash flow.
