Zhitong Finance learned that with the support of generous dividends and sufficient liquidity from major institutional investors, North American Pipeline's shares have been selling at the fastest speed since 2017. Bankers said that the market will continue to open. According to the data, after experiencing a slow start in 2023, sales of new and existing stocks in the energy sector raised 5.7 billion US dollars, the most in six years. Furthermore, oil and gas pipelines are also playing a role beyond their own sector — since January 1 of this year, the pipeline industry added US$910 million in financing, and the total financing amount over the past 12 months accounted for almost half of the total amount of US$14.5 billion in financing for the entire oil and gas industry.

Investors have been eagerly snapping up these shares as the companies are offering huge dividends to shareholders. This is a particularly attractive feature when interest rates stay above 5%. Canadian pipeline operator Enbridge (ENBA.US) took the lead in issuing $3.4 billion of shares in September this year, with a dividend yield of 7.8%, which is coveted. In 2024, Delek Logistics Partners LP (DKL.US), with an 11% dividend yield, raised $138 million.

Daniel Nolan, vice chairman and managing director of equity capital markets at National Bank Financial, one of the member banks of the transaction underwriting team, said about pipeline companies that raise capital through stock offerings: “Any deal would be welcome right now. The market will definitely be open to companies of any size, as long as they can make good use of the money they earn, or even if the use of the money is less exciting, such as paying off debts.”

The liquidity and high yields of these stocks make it easy to market them. “The yield definitely helps,” Nolan said. There are plenty of opportunities for people to increase yields, and many of the deals are bigger than some of last year's.”

Additional stocks were also warmly welcomed. A subsidiary of Apache Petroleum (APA.US) sold the high-priced Kinetik Holdings Inc. (KNTK.US) for $441 million, and Global Infrastructure Partners sold Hess Midstream LP (HESM.US) shares for $331 million. The additional shares issued by both companies were higher than the issue price.

Truist Financial Corp. analyst Neal Dingmann wrote in a March 25 report that the wave of mergers and acquisitions has boosted the upward momentum of pipeline stocks and partnership stocks. This is an “exciting trend,” and he expects it to continue as “hundreds of midstream private equity firms and several publicly traded companies may be targeted for mergers and acquisitions in the coming quarters.”

What is certain is that pipeline companies' stocks generally lag behind the gains of oil and gas producers, even when these huge dividend expenses are factored into the total return. The S&P 500 Energy Index's total return so far this year has exceeded 17%, while the much-publicized Alerian MLP ETF rose slightly less than 14% over the same period.

Paul Baiocchi, chief ETF strategist at SS&C Technologies, which provides Alerian MLP ETFs, believes that considering the oversubscription situation of many stocks, this gap should narrow. “I really think there's a disconnect between the primary market and the secondary market,” he said.

He added that the net inflow of $717 million into the fund over the past three years was “certainly a good figure, but in any case it wasn't a sudden massive amount.” Despite this, the Alerian MLP ETF (made up of pipeline and midstream partners with a current dividend yield of 7.4%) and the energy index have performed well enough to beat the S&P 500.