Pipeline companies rallied sharply in November. Natural gas pipeline giant Kinder Morgan (KMI -0.26%) rallied 15.1%, according to data provided by S&P Global Market Intelligence. Meanwhile, leading master limited partnerships (MLPs) Energy Transfer (ET 0.10%) and Enterprise Products Partners (EPD -0.23%) were both up more than 20%. Those were huge moves for the relatively slower-growing midstream companies more known for paying high-yielding dividends.

Two notable catalysts fueled the rally in pipeline stocks: the election and AI-driven growth prospects.

Fueled by Trump and AI enthusiasm

Stocks surged following the election. The S&P 500 (^GSPC -1.11%) has gained about 2% since Election Day, driven by optimism the incoming Trump administration will cut taxes and regulations.

Several energy stocks have rallied even more, fueled by the hope that the new administration will follow through on its promise of unleashing the shackles holding back U.S. energy production. The belief is that the Trump administration will be more open to issuing permits for drilling wells and building related energy infrastructure, like pipelines and export terminals. That could drive higher production in the coming years. Those rising volumes would benefit midstream companies because it should boost their cash flows.

For example, Energy Transfer's co-CEO Tom Long discussed the election result on the company's third-quarter conference call. He stated, "This industry has gone through a lot over the last four years," including onerous regulations and permitting issues.

However, Long sees the incoming Trump administration as a breath of fresh air. The MLP believes that with the new administration, it will finally be able to move forward with its Lake Charles LNG project. That project encountered another delay over the past year after the current administration temporarily paused issuing new LNG permits. Finally, moving forward with the project would significantly enhance and extend the MLP's growth profile.

A less-hostile administration will enable midstream companies to fully capitalize on a potential boom in natural gas demand in the coming years, fueled by AI data centers. Energy Transfer is already seeing a surge in interest for additional gas pipeline capacity to support gas-fired power plants and data centers. Long stated on the call, "We have never seen this level of activity from a demand-pull standpoint."

Kinder Morgan co-founder Richard Kinder made similar comments on that company's third-quarter conference call. He stated, "In fact, in my decades of experience in the midstream arena, I've never seen a macro environment so rich with opportunities for incremental build-out of natural gas infrastructure." The company has already secured several new gas pipeline expansion projects this year and now has $5.1 billion of committed capital projects underway.

Likewise, Enterprise Products Partners noted on its call that it's seeing more inbound inquiries regarding potential projects supporting additional gas demand in Texas for data centers and gas-fired power plants. That would add to the $6.9 billion of secured capital projects the MLP already has under construction.

With fewer regulatory issues likely and accelerated growth prospects ahead, these midstream companies could grow faster over the next several years. That could give them more cash to increase their already high-yielding dividends.

Potentially entering a boom period

Pipeline companies surged last month following the election. Investors bid them up on the potential for stronger growth prospects, as they should face fewer obstacles in capitalizing on the coming surge in power demand. Despite that rally, most midstream companies still trade at reasonable valuations and offer high dividend yields (over 4% for Kinder Morgan and above 6% for the MLPs). Because of that, they still look like compelling investments for those seeking income and growth potential.