This High-Yield Pipeline Stock Could Pay You $700 a Year on a $10,000 Investment

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This High-Yield Pipeline Stock Could Pay You $700 a Year on a $10,000 Investment.

investing ideas :: 2hrs ago :: source - motley fool

By Lee Samaha

Surging demand for power to support growth in AI applications in data centers has led to a remarkable resurgence in investment in natural gas. And the good news is that income-seeking investors can get high-yield exposure to the investment theme by investing in the Global X MLP ETF (NYSEMKT: MLPA).

The Global X MLP ETF

With a current yield just short of 7%, the ETF will generate about $700 in dividends with an investment of $10,000. Moreover, if you reinvest the dividend each year in addition to investing $10,000 each year, all things being equal, you will have $138,164 after 10 years. Based on the 7% dividend yield, that figure could generate about $9,700 in yearly dividends in a decade.

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Is the Global X MLP ETF a buy?

That said, if the current positive trends behind natural gas continue, then "all things" will not be equal, and investors will also see substantial capital appreciation. That argument is based on the idea that the 20 Master Limited Partnerships (MLPs) in the ETF will benefit from an increased volume of gas used, and an increase in projects signed with hyperscalers looking to bypass utilities and deal directly with pipeline companies.

Image source: Getty Images.

In any case, even if hyperscalers are not dealing directly with MLPs, they are still adding to the demand for gas. It's a demand that, for now, doesn't appear to be abating, and Elon Musk's recent acquisition of a company that provides gas power is proof positive of that. As such, this ETF offers an excellent way for passive investors to profit from a backdoor play on the AI investment boom.

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Lee Samaha has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

This article was originally published by The Motley Fool