Investing in pipeline stocks
Dividends are common perks, but protests can sideline projects and hurt profits.
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. Read on to find out more about investing in pipeline stocks, including the risks and returns.
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 pipeline stocks?
From 2019 to 2025, global oil production is expected to grow massively. 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 Australian 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.
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 in Australia. Review your options below.
6 of 6 results
Compare other products
We currently don't have that product, but here are others to consider:
How we picked theseFinder Score for share trading platforms
We've scored over 30 share trading platforms assessing them for their core features, fees, customer experience and accessibility. Our experts give each platform a score out of 10.
Important: The standard brokerage fee displayed is the trade cost for new customers to purchase $1,000 of either Australian or US shares. Where a platform charges different fees for both US and Australian shares we show the lower of the two. Where both CHESS sponsored and custodian shares are offered, we display the cheapest option.
Bottom line
Australian 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
More resources on Finder
Ask a question
More guides on Finder
-
SpaceX: Where to buy SpaceX shares in Australia
Australian investors can buy SpaceX (SPCX) shares directly via a broker with NASDAQ access, or indirectly through an ETF.
-
Webull Australia review
Webull is a broker with zero-commission trading and a suite of tools to help you invest.
-
Tiger Brokers Australia review
If you're thinking of trading stocks with Tiger Brokers, check out our review of this online broker's fees, safety and pros and cons first.
-
moomoo Australia review
Gain access to the US and Australian markets for less through moomoo share trading accounts.
-
How to invest in the ASX 200
You often hear people talk about whether the ASX200 is up, down or flat. So, why is it such a big deal?
-
How to invest in the S&P 500
Find out the different ways you can invest in the S&P 500 index from Australia.
-
How to buy gold in Australia
If you’re thinking of investing in gold, our guide will explain how and where to buy gold in Australia as well as the pros and cons of investing in it.
-
How to invest in silver in Australia
Here's a guide to your different investment options, the benefits of investing in silver and the possible risks.
-
eToro Australia review
Join the world’s largest social trading network and learn from experienced forex traders with eToro Australia.
-
IG share trading platform review
IG share trading provides access to more than 13,000 stocks on Australian and international markets and is backed by low commissions and 24-hour support.