3 Pipeline Stocks to Buy in May

Pipelines have never been more crucial to supporting the world's energy needs. The closure of the Strait of Hormuz has shown the importance of pipeline infrastructure in the Middle East (Saudi Arabia's East-West pipeline and the UAE's Abu Dhabi pipeline). While they haven't completely offset the supply disruption, they've helped lessen the blow.

The world needs much more pipeline capacity in the future to support growing energy demand. Here are three pipeline stocks to buy in May to capitalize on the growth in this crucial energy infrastructure.

Image source: Getty Images.

Enbridge

Enbridge (NYSE: ENB) operates the longest and most complex crude oil and liquids transportation system in North America, handling 30% of the crude oil produced on the continent. The energy company also has a large-scale natural gas pipeline operation, transporting about 20% of the gas consumed in the U.S.

The Canadian pipeline and utility company (Enbridge also operates North America's largest gas utility franchise and is a leader in renewable energy investment) is investing heavily in expanding its pipeline operations. At the end of last year, Enbridge had 39 billion Canadian dollars ($28.7 billion) of commercially secured expansion projects. It had projects to optimize and expand its mainline oil pipeline in Canada, modernize its U.S. gas pipeline operations, and expand several gas pipelines across the U.S. and Canada.

Enbridge is evaluating over CA$10 billion ($7.4 billion) of new gas transmission projects it could approve through 2030, along with more than CA$8 billion ($5.9 billion) of additional liquids pipeline projects. The company's growing pipeline operations should support around 5% annual earnings growth after this year. That should give Enbridge plenty of fuel to continue increasing its more than 5%-yielding dividend (which it has done for 31 straight years in Canadian dollars).

Energy Transfer

Energy Transfer (NYSE: ET) operates over 140,000 miles of pipelines across the U.S. It transports natural gas, oil, natural gas liquids (NGLs), and refined products from production basins to market centers, including export markets.

The master limited partnership (MLP) plans to invest over $5 billion this year in expanding its pipeline and energy midstream operations. That spending includes funding toward building two major gas pipelines: The $2.7 billion Hugh Brinson pipeline (in service late 2026 and early 2027) and the $5.6 billion Desert Southwest expansion project (in service late 2029). Energy Transfer is also expanding several other oil and gas pipelines to support rising energy demand.

The MLP is pursuing several other expansion projects, primarily related to gas infrastructure, to support robust demand from the power industry and AI data centers. Energy Transfer expects these pipeline investments to support the continued growth of its nearly 7%-yielding distribution, which it aims to increase by 3% to 5% each year.

Kinder Morgan

Kinder Morgan (NYSE: KMI) operates the largest natural gas pipeline transmission network in the U.S. at 56,000 miles. Its system transports 40% of U.S. gas production. Kinder Morgan also operates thousands of miles of pipelines for gas gathering, NGLs, refined products, crude oil, and carbon dioxide.

The gas pipeline giant has over $10 billion in growth capital projects in its backlog, primarily for gas infrastructure. It's building three major gas pipelines (South System Expansion 4, Trident, and Mississippi Crossing) to support growing demand.

Kinder Morgan is pursuing more than $10 billion of additional projects. In addition to new gas pipelines, it's pursuing the Western Gateway Pipeline project with a partner to build a new refined products pipeline system to the West Coast. The company's expansion projects should support continued earnings and dividend growth. Kinder Morgan has increased its nearly 4%-yielding dividend for nine years in a row.

Pipeline stocks for the long haul

Pipelines are vital to supply the economy with the energy it needs. We'll need a lot more pipeline capacity in the future, which will benefit leading pipeline owners Enbridge, Energy Transfer, and Kinder Morgan. They already have several pipeline projects under construction, with more under development. These investments should give them the fuel to continue growing their dividends, positioning these pipeline stocks to generate strong total returns in the coming years. That high-octane return potential makes them great buys this month.

Matt DiLallo has positions in Enbridge, Energy Transfer, and Kinder Morgan. The Motley Fool has positions in and recommends Enbridge and Kinder Morgan. The Motley Fool has a disclosure policy.