As oil prices stay strong, oil and gas pipeline stocks, which offer plenty of dividend income, are pulling back. Investors seeking income should consider starting a position in stocks like Enbridge (TSX: ENB) and Energy Transfer Partners (NYSE:ETP).
On October 10, Enbridge reported a fire in its B.C. operations but resumed operations the next day (Oct. 11). In mid-November, it will complete repairs and the pipeline will resume, albeit at lower pressure.
The stock may have weakened as a result of the uncertainties from the fire but Enbridge had it under control. With gas, a breakdown in corrosion protection causes such events but rarely is there any explosion.
In seasonal terms, demand for gas should increase steadily as the cold fall continues and winter approaches. At a dividend yielding over 6 percent, investors should consider Enbridge.
Energy Transfer Partners is another attractive oil and gas pipeline stock. The firm completed its merger with Energy Transfer Equity. The simplified structure should cut operational costs and please the markets, which tend to punish complicatedly-structured stocks.
ETP may maintain its current dividend for the foreseeable future, thanks to a 1.6x coverage, plus its debt obligations are manageable. If the yield does get cut, the cash savings will benefit the company’s future prospects. In effect, shareholders will forfeit a regular income in return for management investing back into the business.
