5 Best MLP and Pipeline Stocks To Buy Now

Below we presented the list of 5 best MLP and pipeline stocks to buy now. For our detailed discussion and a more comprehensive list please see 12 Best MLP and Pipeline Stocks To Buy Now.

5. Targa Resources Corporation (NYSE:TRGP)

No of HFs: 30

Total Value of HF Holdings: $295 Million

Yield: 1.5%

Targa Resources Corporation is one of the leading providers of midstream services. During the third quarter of 2020, the company reported a distributable cash flow and free cash flow before dividends of $294.7 million and $189.3 million.

The top hedge fund holder of this stock is Steve Cohen’s Point72 Asset Management which had $40 million invested in the stock at the end of September.

4. Energy Transfer LP (NYSE:ET)

No of HFs: 31

Total Value of HF Holdings: $427 Million

Yield: 17.3%

Energy Transfer LP is engaged in natural gas and propane pipeline transport. The company is responsible for developing the Dakota Access Pipeline. The DAPL is a 1,172-mile-long underground oil pipeline that begins in the shale oil fields of the Bakken formation and continues through South Dakota and Iowa to an oil terminal near Patoka, Illinois.

Billionaires David Abrams and David Tepper each has more than $100 million invested in ET at the end of September.

3. Williams Cos. (NYSE:WMB)

No of HFs: 38

Total Value of HF Holdings: $581 Million

Yield: 8%

The third best MLP and pipeline stock to buy now is Williams Cos Inc. The company provides the infrastructure that safely delivers natural gas. They are focused on connecting North America’s hydrocarbon resource to growing markets for gas.

The company announced that its board of directors appointed Rose Robeson as an independent board. Rose was a chief financial officer of DCP Midstream, the largest natural gas liquid producer and gas processor in the United States. Stephen W. Bergstrom, chairman of the Williams Board of Directors said that Rose is an excellent addition because of her accomplished career and commitment across the energy value chain.

“The Williams Board is pleased to welcome an outstanding new director in Rose, who brings tremendous financial expertise and deep industry experience from across the energy value chain. Rose’s accomplished career and commitment to strong corporate governance makes her an excellent addition to the growing diversity of the Williams Board and positions the company to continue to deliver long-term, sustainable value and growth for our shareholders.”

2. Cheniere Energy Inc (NYSE:LNG)

No of HFs: 40

Total Value of HF Holdings: $1.97 Billion

Yield: NA

Cheniere Energy Inc. is the biggest exporter of natural gas in the US. The company was mentioned in an article about 11 Countries with Highest Natural Gas Reserves. The company owns and operates liquified natural gas receiving terminals and liquified natural gas pipelines.

In an article, Horizon Kinetics mentioned some of their comments for the stock.

“Given the abundance of natural gas being produced in the United States right now, Cheniere has embarked upon an expansion strategy, which will consist of three additional trains at a new export facility in Corpus Christi, Texas (strategically located near the Permian Basin). Commercialization of two of these trains is expected to occur in 2019, with the total project reaching completion in 2021. Based on current plans, the company will have nine full-size trains operating overall, as well as several smaller trains at the Texas location.

Cheniere is in the middle of a long-term growth expansion that will add significant capacity in coming years (and quite a bit in 2019 alone). It currently has $32 billion in total assets (and $28 billion of debt). One way to roughly estimate the earnings power of this balance sheet is to compare the returns of the oil/gas pipeline companies – a somewhat similar set of regulated energy companies with long-term revenue contracts. Based on a sample of the largest pipeline operators, the after-tax return on assets is in the range of 3%-10%. If Cheniere can only earn a 6% ROA, it would generate over $7/share of net earnings. At a low multiple of 12x, the share price would be $89, which is a significant premium over the current price.

Additionally, only half of the company’s assets are actually operational, while the balance still represents construction-phase projects. Based on income recorded in 2018 relative to the operational assets, the longer-term ROA (when all construction is finished and the assets are mobilized) might be closer to 8%. This would suggest a share price of roughly $120, which is twice the current price.”

1. Kinder Morgan, Inc. (NYSE:KMI)

No of HFs: 46

Total Value of HF Holdings: $939 Million

Yield: 7.7%

The top one best MLP and pipeline stock to buy now is Kinder Morgan, Inc. They are one of the largest energy infrastructure companies in North America. They own interest and or operate 83,000 miles of pipelines and 147 terminals. KMI was mentioned as of the 10 Best Dividend Stocks Under $20 and one of the 5 Dividend Stocks to Boost Cash Flow in 2021.

For 2021, the company remains committed to maintaining a strong balance sheet as they announced their preliminary financial projections. Steve Kean, KMI’s chief executive officer said that in 2021, they expect to generate $2.1 billion in net income.

“In 2021, we expect to generate $2.1 billion in net income attributable to KMI, $2.0 billion more than our 2020 forecast, due primarily to asset and goodwill impairments taken during 2020. We also expect to generate $4.4 billion in DCF during 2021, approximately 3% below our current forecast for 2020 DCF. DCF will be negatively impacted by lower re-contracting rates on certain Natural Gas Pipeline segment assets (mainly Ruby and FEP pipelines, as we have noted for the last couple of years), lower crude volumes and realized prices in the CO₂ segment, lower capitalized overhead as a result of lower discretionary capital expenditures, and higher sustaining capital expenditures partially offset by projects placed in service and increased refined product volumes. DCF less discretionary capital expenditures and dividends is expected to be $1.2 billion, an improvement of more than $700 million compared to our 2020 forecast. Our budget guidance includes savings from a corporate-wide organizational efficiency and effectiveness project that resulted in approximately $100 million in annual costs savings to KMI and an expected 2021 DCF benefit of $72 million, taking into account partial year savings in 2020, allocations to capital, and other items. We will go into greater detail on that process when we present our budget on January 27”

Please also see 12 Best Infrastructure Stocks to Buy Now and 15 Best E-Commerce Stocks to Buy Now.

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Disclosure: None.