Pipelines are like toll roads. And the "tolls" the pipeline operators collect generate steady and reliable cash flow.
Wouldn't it be nice to own such a cash-cow kind of asset to receive a dependable revenue stream yourself? You can own at least a part of some pipelines. If you want to make over $4,700 in passive income this year, invest $25,000 in each of these three midstream energy stocks.
1. Enbridge
Enbridge (ENB -0.45%) operates pipelines across North America, including 54,000 miles of natural gas and natural gas liquids (NGLs) in the U.S. It's the largest midstream energy company based on market cap.
However, Enbridge's business goes beyond midstream operations. Thanks to several acquisitions from Dominion Energy completed in 2023, the company is now the largest natural gas utility in North America. Enbridge has also become a major player in the renewable energy market.
The company's forward dividend yield currently stands at 6%. An initial investment of $25,000 in Enbridge should generate $1,500 in passive income this year. Your passive income from owning Enbridge is likely to grow in the future. This midstream leader has increased its dividend for 30 consecutive years.
Enbridge has delivered a solid gain of around 25% over the last 12 months. I think it could keep up those winning ways with the anticipated growth in natural gas demand and a tailwind from data centers that have significant power requirements.
2. Energy Transfer
Energy Transfer (ET 0.89%) owns over 130,000 miles of pipeline that transport crude oil, natural gas, NGLs, and refined products in the U.S. The limited partnership (LP) also operates processing facilities, storage facilities, and terminals.
Acquisitions have played an important role in Energy Transfer's growth in recent years. For example, the company bought Lotus Midstream and Crestwood Equity Partners in 2023. Energy Transfer acquired WTG in 2024 in a deal that expanded its Permian Basin operations.
As an LP, Energy Transfer pays distributions to unitholders instead of dividends to shareholders. Its forward yield is an ultra-high 6.51%. This translates to an annual income of nearly $1,628 from an initial investment of $25,000. The company expects to increase its distribution by 3% to 5% per year.
Energy Transfer has also rewarded investors with a strong gain of 37% over the last 12 months. The company's capital projects, including relocating an idle plant to the Delaware Basin this year to boost process capacity, should help deliver additional growth.
3. Enterprise Products Partners
Enterprise Products Partners (EPD -0.18%) operates over 50,000 miles of pipeline throughout the U.S. It also owns multiple other midstream assets including more than 300 million barrels of liquids storage, 42 natural gas processing trains, 26 fractionators (equipment that separates hydrocarbons into their components), and 20 deepwater docks.
There's a lot to like about Enterprise Products Partners. It has heavy insider ownership. The company's balance sheet is strong. Enterprise is the only midstream energy infrastructure company with an A- credit rating indicating a low default risk. It's also the only midstream company that has been able to grow its adjusted cash flow from operations and buy back units without significant asset sales.
Probably the thing investors seeking passive income will like the most about Enterprise Products Partners, though, is its distribution. The LP's forward distribution yield is 6.4%. An initial investment of $25,000 would generate income of $1,600 in 2025, bringing our total passive income from these three midstream energy stocks to roughly $4,728. Enterprise Products Partners also has a distribution track record nearly as impressive as Enbridge's with 27 consecutive years of distribution increases.
Over the last 12 months, Enterprise Products Partner's unit price has jumped 22%. The LP's capital projects should continue to fuel growth. Enterprise has several projects under construction that should be completed this year, including the Orion and Mentone West plants in the Delaware Basin.
