This Overlooked Pipeline Stock Could Be a Generational Wealth Builder for Patient Investors

Generational wealth isn't easily attained, and the very implication of the phrase is that it takes a long time to accumulate. So yes, patience is indeed a virtue.

That virtue applies to overlooked equities. "Overlooked" is a badge that's been worn by scores of companies over the years, including some market darlings. Even Nvidia was once overlooked. In fact, it was on the doorstep of bankruptcy in 1996. Admittedly, Nvidia is a once-in-a-lifetime story, but there are plenty of underappreciated stocks out there today with wealth-building potential, with many hailing from the mid-cap space.

Enter Hess Midstream (NYSE: HESM), a name that's certainly overlooked relative to larger pipeline peers but one that also has the potential to reward patient investors. And yes, patience is very much required with this midstream stock.

Hess Midstream doesn't look like it now, but it could be a serious wealth-building stock. Image source: Getty Images.

First, the bad news

Whether it's bad news, a reiteration that Hess Midstream won't be an overnight home run, or both (it's both), dark clouds hang over this energy stock as it's down some 20% over the past month. Hello, bear market. The reason for that slide is simple and stock-specific: Earlier this month, Chevron (NYSE: CVX) announced it would be unloading its Hess Midstream stake.

Investors' visceral reaction to that news largely boils down to the midstream company agreeing to accept lower fees from Chevron in the Bakken Shale from 2027 through 2033, prompting a trimming of 2026 earnings before interest, taxes, depreciation, and amortization (EBITDA) guidance and what market participants viewed as a tepid 2027 outlook.

However, it's not all bad news. A case can be made that Hess Midstream's slump is an example of too far, too fast. After all, integrated oil companies, of which Chevron is one, have histories of divesting midstream assets. Chevron itself sold some midstream assets last year as part of a broader restructuring plan, so it's not surprising that it's parting ways with its Hess Midstream stake.

That doesn't mean the two companies are divorcing. Chevron extended its commitment to use Hess Midstream infrastructure from 2033 to 2045, and the transfer of the Denver Julesburg Basin energy storage assets broadens the midstream entity's geographic footprint. Maybe those factors don't spell generational wealth creation, and they were almost certainly glossed over in the wake of the Chevron divestment news.

Still, with Hess Midstream shares yielding 10%, investors will be compensated for their patience as this stock attempts to author a turnaround story.

Some things to look forward to

Investors who are willing to take the long view on Hess Midstream, which was largely anonymous in midstream terms until earlier this month, have some things to look forward to, including another near-term dividend hike, assuming the company sticks to its payout-raising schedule.

That's important because dependable dividend growth can be a key component of prudent investors' long-term, wealth-building plans. On a related note, Chevron is transferring its equity interest in Hess Midstream, meaning the pipeline company's outstanding share count will plunge by 40%. Fewer shares mean reduced dividend obligations, making it easier to consistently raise the payout over time.

So while there's no denying Hess Midstream has some work to do to restore investors' confidence over the near term, it can't be ignored that there are some long-term positives in place.

Todd Shriber has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chevron and Nvidia. The Motley Fool has a disclosure policy.