When most investors think about what companies are cashing in on the AI data center boom, they typically picture chipmakers or utilities. Many investors don’t initially consider pipeline companies that supply gas to data centers or utilities. That’s a missed opportunity for generating income. For example, you could generate $600 a month in dividend income by investing around $141,000 into some of the pipeline companies cashing in on AI power demand.
Here’s a look at some of the top pipeline stocks to buy to generate income from the AI data center boom.
Image source: Getty Images.
Pipeline AI profits into your portfolio
Pipeline giants Energy Transfer (ET +0.43%) and Kinder Morgan (KMI +1.69%) are leaders in capitalizing on surging gas demand to support AI data centers. Here’s the math for generating $600 a month from these energy stocks:
| Pipeline stock | Total investment | Yield on cost | Annual dividend income | Monthly Dividend Income |
|---|---|---|---|---|
| Energy Transfer | $70,625.00 | 6.5% | $4,555.31 | $379.61 |
| Kinder Morgan | $70,625.00 | 3.8% | $2,648.44 | $220.70 |
| Total | $141,250.00 | 5.1% | $7,203.75 | $600.31 |
Data source: Google Finance and the author’s calculation.
I chose these pipeline stocks for their strong financial profiles and meaningful exposure to the AI power trend.
Energy Transfer has signed several deals to support AI data center power demand, including those to directly supply gas to data centers and to power producers. The master limited partnership (which sends a Schedule K-1 Federal tax form) is also investing in several large-scale gas pipeline projects to support rising gas demand. These investments should give it the fuel to grow its distribution by 3%-5% each year.
Today’s Change
(0.43%) $0.09
Current Price
$21.14
Key Data Points
Market Cap
Day’s Range
$20.95 – $21.28
52wk Range
$16.18 – $21.84
Volume
14.2M
Avg Vol
8.6M
Gross Margin
10.94%
Dividend Yield
6.36%
Meanwhile, Kinder Morgan currently has $8.2 billion of natural gas pipeline projects under construction to support rising gas demand. Additionally, it’s pursuing over $10 billion in other opportunities beyond its backlog to support growth in gas demand. These projects should give Kinder Morgan the fuel to continue increasing its dividend, which it has done for nine straight years.
You can collect real income today by investing in the pipeline stocks cashing in on the AI data center boom. While $141,250 is a lot to begin with, you can also start small and steadily build your income, as a $12,000 investment would produce over $600 in dividends each year.
Matt DiLallo has positions in Energy Transfer and Kinder Morgan. The Motley Fool has positions in and recommends Kinder Morgan. The Motley Fool has a disclosure policy.
