Politics, Pipelines, and My Watch List

I try not to let politics guide my investing approach. The primary reason I do not let it influence my investing habits is that the political landscape can change with every election and I believe most politicians pander for votes so its never easy to understand what they stand for (probably themselves lol).

However sometimes there are political policies or agendas you simply cannot avoid from influencing your investing approach. For me, the recent cancellation of the Keystone pipeline was a clear message that we will not be seeing any major new pipeline projects for the foreseeable future. This view has changed my approach towards investing in Energy MLPs, my original plan was to not invest in pipeline stocks until I hit retirement and rolled over my 401K to fund the purchase but now I have to re-evaluate this approach.

Pipeline infrastructure is not an just the most efficient method for moving fossil fuels but also bio-diesel, recycled natural gas and hydrogen making it a vital infrastructure for many years to come. With no new major pipeline projects that translates to a limited pipeline supply making existing pipeline more valuable. Long term this may increase the share price of Energy MLPs and since I am 7 years out from retirement I may be paying a higher share price for a lower dividend yield if I stick to my original plan. Due to this potential. I am adding the two largest (at least in miles of pipeline) Energy MLPs to my watchlist; Enbridge (ENB) and Kinder Morgan (KMI) and will start building out a position.

Looking at the chart above, EPD (blue line) is up 13.6% and KMI (purple line) is up 24.4% since March. ENB & KMI have both seen their share price rise quite a bit in the second quarter but I am looking for at least a 7% yield out of an Energy MLP and will have to wait for share prices to retreat a bit.

2 thoughts on “Politics, Pipelines, and My Watch List

  1. In the energy sector I prefer to invest in the pipeline companies. I view these companies as a “safer” play. I currently have positions in ENB and EPD. I have seen good capital appreciation as well as the high dividend yield.

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  2. I completely understand. I am not heavy into the commodities market and got burned many years ago with an iron ore company. Pipelines are definitely an easier play and if my theory holds true you may see more capital gains long term.

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