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Pipeline Stocks Offer Income Potential: 3 Companies to Watch

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  Published in Stocks and Investing on Monday, December 29th 2025 at 7:56 GMT by The Motley Fool

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Pipeline Powerhouses: Three Stocks to Consider for Income Investors (According to The Motley Fool)

For investors seeking reliable income streams in a potentially volatile market, pipeline stocks often present an attractive opportunity. These companies, which transport essential resources like natural gas, oil, and refined products, typically operate under long-term contracts, providing a degree of stability that’s less common in other sectors. Recently, The Motley Fool published an article highlighting three specific pipeline companies – Gel TransGas (a subsidiary of Equitrans Midstream Corporation - ET), Westhill Energy (WES), and Kinder Morgan (KMI) – as particularly compelling options for income-focused investors. Let's break down why these stocks are being considered, their strengths, potential risks, and how they compare to each other.

The Allure of Pipelines: Stability & Dividends

Before diving into the individual companies, it’s important to understand the general appeal of pipeline investments. Pipelines represent essential infrastructure. Demand for energy (and therefore the need to transport it) remains consistent, even during economic downturns. This leads to relatively predictable revenue streams. Furthermore, many pipeline operators are structured as Master Limited Partnerships (MLPs), a unique business structure that allows them to distribute a significant portion of their earnings directly to investors in the form of dividends. While MLPs have complexities (we'll touch on those briefly later), the high dividend yields they often offer are a key draw for income-seeking portfolios.

1. Equitrans Midstream Corporation (ET) & Gel TransGas: A Recovery Story with Upside Potential

The Fool’s article focuses primarily on Gel TransGas, which is essentially the core pipeline business operating under Equitrans Midstream. Gel TransGas owns and operates a substantial network of natural gas transmission pipelines, particularly in the Appalachian Basin – a region experiencing significant shale gas production. This geographic advantage positions it well to benefit from ongoing energy demand.

The article highlights that Gel Transgas has been working through challenges related to its Mountain Valley Pipeline (MVP) project, which faced years of regulatory hurdles and delays. However, with the MVP finally in service, Gel TransGas is now poised for a significant earnings boost. The pipeline's capacity will allow Equitrans Midstream to move more gas from the Marcellus and Utica shale regions to markets along the East Coast, generating substantial revenue.

The article emphasizes that the market hasn’t fully priced in this positive development, creating an opportunity for investors. Equitrans Midstream’s current dividend yield is attractive, and the company's management team has demonstrated a commitment to returning capital to shareholders. However, it's important to note that the stock carries some risk. Regulatory changes or unexpected operational issues could still impact performance. Furthermore, as an MLP (though Equitrans Midstream converted from one in 2023), investors need to understand the tax implications associated with MLPs – income is often taxed as ordinary income rather than qualified dividends.

2. Westhill Energy (WES): A Diversified Portfolio & Disciplined Approach

Westhill Energy stands out for its broader portfolio of assets, including natural gas pipelines, storage facilities, and processing plants. Unlike Gel TransGas’s concentration in the Appalachian Basin, Westhill operates across a wider geographic footprint, reducing its reliance on any single region. This diversification provides a degree of stability.

The Fool's analysis points to Westhill's disciplined approach to capital allocation as another key strength. The company has prioritized debt reduction and shareholder returns over aggressive growth initiatives. This focus on financial prudence makes it appealing for risk-averse investors. Westhill’s dividend yield is competitive, and the company maintains a strong balance sheet.

However, Westhill's more conservative strategy also means that its potential for rapid growth might be limited compared to companies pursuing more aggressive expansion plans. While diversification is generally positive, it can sometimes mean lower overall returns if certain segments underperform. The article notes that while Westhill isn’t the "hottest" stock, its stability and dividend yield make it a solid choice for income investors seeking a reliable investment.

3. Kinder Morgan (KMI): A Giant with Scale & Cash Flow

Kinder Morgan is arguably the largest energy infrastructure company in North America, boasting an extensive network of pipelines spanning natural gas, crude oil, and refined products. Its sheer size provides significant economies of scale and bargaining power. The Fool's article highlights Kinder Morgan’s impressive cash flow generation as a key reason to consider it. This strong cash flow supports the dividend and allows for continued investment in infrastructure projects.

Kinder Morgan has also been actively streamlining its operations, selling off non-core assets to focus on its most profitable segments. This strategic shift aims to improve efficiency and enhance returns. The company’s current yield is attractive, and it's generally considered a more stable and established player in the pipeline sector compared to some of the smaller companies.

The downside? Kinder Morgan's size can also mean slower growth rates. Furthermore, its vast network exposes it to a wide range of regulatory risks and potential environmental liabilities. While the company has a strong track record of managing these risks, they remain factors to consider.

Comparing the Three: A Quick Summary Table

Conclusion: Due Diligence is Key

The Fool’s article presents a compelling case for these three pipeline stocks as income-generating investments. However, it's crucial to remember that all investments carry risk. Investors should conduct their own thorough research and consider their individual financial goals and risk tolerance before making any decisions. Understanding the specific operational challenges, regulatory landscape, and financial health of each company is essential for informed investing. While these three companies offer attractive income potential, a diversified portfolio remains the cornerstone of sound investment strategy.