Midstream Stocks Approach 52-Week Lows: Time to Buy?

Several midstream stocks hit their respective 52-week lows in the last five days, and most are still trading at or near these levels. Crude oil prices took a hit yesterday amid concerns over trade talks, Russia’s stand on future oil output cuts, and rising US supply. These factors likely impacted midstream energy companies.

Energy Transfer stock fell

Energy Transfer (ET) stock hit a new 52-week low of $10.84 on November 13. The stock fell on reports of a corruption investigation of one of its projects. Energy Transfer stock has risen since then to close at $11.33 yesterday.

You can learn more about the stock’s recent performance in Energy Transfer Stock Fell to Three-Year Low: What’s Next? and Energy Transfer: Solid Q3 Earnings Fail to Lift Its Stock.

Midstream stocks near 52-week lows

Plains All American Pipeline (PAA) hit a new low on November 14. In comparison, several small MLP and midstream stocks fell significantly yesterday. Antero Midstream (AM), CVR Partners (UAN), Western Midstream Partners (WES), MPLX (MPLX), Enable Midstream Partners (ENBL), EnLink Midstream (ENLC), and EQM Midstream Partners (EQM) were among the stocks that hit their 52-week lows yesterday.

Noble Midstream Partners (NBLX) and Blackstone Minerals (BSM) are among the other energy stocks that hit their 52-week lows yesterday.

Risks faced by energy stocks

While most of the above stocks also offer high yields, they remain exposed to oil price volatility. Higher yields generally come with a higher risk. High leverage, commodity-price exposure, and stretched cash flows due to lower demand are among the risks that midstream companies face. If the company isn’t able to generate sufficient cash flows, investors face the risk of a dividend cut.

Despite many improvements in financial and capital discipline, midstream companies remain out of favor with investors. One of the reasons is that several of these stocks are structured as MLPs. Because MLP structures add to tax filing complexity, many investors avoid them. Recently, midstream C corporation stocks have performed better than their MLP counterparts. Kinder Morgan (KMI) and ONEOK (OKE) are up around 30% so far in 2019, outperforming the S&P 500 Index.

To learn about some of the top midstream companies offering attractive yields, please read 5 Dividend Stocks for an Uncertain Market.

You can learn about analysts’ ratings on midstream stocks in Top Midstream Energy Stocks: What Analysts Got Wrong.