3 Pipeline Stocks to Buy in May

The article highlights three pipeline operators—Enbridge, Energy Transfer, and Kinder Morgan—as long-term beneficiaries of rising global energy demand and the need for more pipeline capacity. Enbridge has CA$39 billion of secured expansion projects and sees about 5% annual earnings growth, while Energy Transfer plans more than $5 billion of capital spending this year and Kinder Morgan has over $10 billion in backlog. All three are framed as dividend-growth names, with yields near 5%, nearly 7%, and nearly 4%, respectively.

Analysis

The market is still underpricing the duration of the pipeline buildout cycle. The important second-order effect is not just volume growth, but tariff re-rating: as power demand, LNG exports, and data-center load pull gas molecules into tighter basins, the marginal value of constrained takeaway rises faster than commodity prices themselves. That favors large-scale interstate operators with embedded rights-of-way and regulatory moats, while smaller regional systems without interconnect optionality are likely to lag.

Among the three, ENB screens as the cleanest low-volatility compounding vehicle because its growth pipeline is already largely de-risked and its cash flows are less exposed to spot-cycle noise. ET has the most asymmetric upside if gas infrastructure demand from power and AI keeps tightening, but it also carries the highest execution and governance discount, so the market may need proof of FID-to-in-service conversion before granting a multiple re-rate. KMI sits in the middle: lower yield than ET, but likely the best balance of balance-sheet quality and growth visibility if additional projects keep converting from backlog to sanctioned capital.

The key risk is that the current enthusiasm for “more pipelines” can outrun actual demand growth in select corridors. If power demand assumptions soften, or if permitting/contracting delays push in-service dates beyond 2027-2029, the market may start treating these as long-duration capex stories rather than cash-return stories. In that scenario, high-yield pipeline names would likely de-rate first, with the biggest pain in names where dividend growth is being underwritten by aggressive project execution rather than existing cash flow.

The contrarian read is that this is less a broad energy bull thesis than a bottleneck scarcity trade. The winners are the operators that control constrained network nodes and can force higher incremental returns on new pipe; the losers are consumers of gas transport capacity, including power generators and LNG-linked users if basis differentials widen. The signal to watch over the next 6-18 months is not oil prices, but whether project announcements convert into sanctioned backlog faster than inflation and labor costs erode project IRRs.

Key Decisions for Investors

• Long ENB for 6-12 months as the defensive compounder: highest visibility on contracted growth, lower execution variance, attractive for total-return investors even if rates stay sticky.
• Pair trade: long KMI / short a higher-beta midstream proxy over 3-6 months. KMI offers cleaner balance-sheet quality and project conversion optionality; use the spread to express a quality-over-yield view.
• Speculative long ET with a defined risk budget for 9-18 months. Best upside if AI/data-center gas demand keeps driving sanctioning, but size smaller than ENB/KMI due to governance and execution discount.
• Consider selling out-of-the-money puts on ENB or KMI into any sector pullback. The setup is range-bound yield compression with improving fundamentals; premium capture is attractive if you want entry at a lower basis.
• Avoid chasing the group after headline geopolitical spikes; wait for post-event retracements to add. The real catalyst is project sanctioning and basis tightening, not short-lived oil price moves.