Pipeline Stocks and Income

Ever since I ventured out to become an Income Investor I've always liked pipeline stocks to help generate monthly income.

The other thing I had always heard about pipeline stocks and another reason to ignore analysts and brokers was that it doesn't matter what the price of oil does it won't have any effect on the pipelines.

What a crock of shit that turned out to be. Pipeline stocks have been hammered lower along with the price of oil. It's a total correlation with the oil price and not a disconnect like touted.

They are however a toll booth for the oil to get to market. There are also so many bottlenecks along the way which also has affected the stock price of all these pipeline stocks. In recent years the stock prices have moved down on a lot of these stocks and the dividend hasn't moved.

However if you like monthly income have time on your side and can ignore the stock price, I believe you have to be here in this space.

TRP, ENB, IPL, KEY and PPL are the main pipeline stocks in Canada

These are also referred to as energy infrastructure stocks.

The Upside

• consistent monthly income
• diversified structure
• can transport both oil and gas

The Downside

• lots of debt 
• highly susceptible to rising interest rates
• very expensive stocks to buy on a p/e basis

You absolutely MUST become an Income Investor in retirement. It is the best way to grow your income and have a consistent and growing cash flow in retirement. Owning some pipeline stocks accomplishes part of that.

How much should you own and what companies? One maybe two stocks in this space is enough. Buy what is the cheapest and yields the most. That is what you are trying to capture.

As I am finding out, you have to concentrate on the dividend payment and not whether the stock falls or rises in value. You don't buy it to sell it, but instead for the stock to continue to pay you on a monthly or quarterly basis.

It will drive you nuts if you look at these investments every day so don't. They are very volatile but their payouts are consistent and reliable.

It is not good for your mental health to keep checking up on them and you would be more likely to talk yourself into selling at the wrong time.

I own ENB and TRP in the energy infrastructure space in my long term retirement account. They yield 6.5% and 4.9% respectively.

Enbridge has never yielded higher in it's history as it does now. It is highly leveraged and the market has punished the stock. Retail investors should have a serious look at it right here, in my opinion.

However, do not establish a big position of your retirement money in pipelines. I have a 5% total weighting here.

Do you own any pipeline stocks? If yes which ones?

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