4 Midstream Stocks to Buy Now for Long-Term Growth

The energy sector is experiencing a resurgence, driven by favorable government policies and the increasing demand for natural gas and LNG exports. Midstream companies, which handle the transportation, storage, and processing of oil and natural gas, are poised to benefit from these trends. Here are four brilliant midstream stocks to buy now and hold for the long term.

1. Energy Transfer (NYSE:ET)

Energy Transfer owns one of the largest integrated midstream systems in the U.S., making it a key player in the energy arbitrage market. The company's extensive network allows it to capitalize on seasonal, regional, and product spreads, providing additional opportunities for profit. Energy Transfer is particularly well-positioned in the Permian Basin, the most prolific oil basin in the U.S., which is also home to a lot of cheap associated natural gas. This positions the company to take advantage of the growing power needs for artificial intelligence (AI) infrastructure.

Energy Transfer is boosting its growth capital expenditures (capex) to capitalize on these opportunities. In addition to its growth prospects, Energy Transfer offers a 7% forward yield, with its distribution expected to grow by 3% to 5% annually. This makes it an attractive option for income-oriented investors.

2. MPLX (NYSE:MPLX)

MPLX operates in two segments: logistics & storage (L&S) and gathering & processing (G&P). It handles approximately 10% of the natural gas produced in the U.S. and has strong positions in both Appalachia and the Permian. The company is upping its growth capex this year, taking it from $889 million last year to $1.7 billion in 2025. MPLX is seeing increasing demand from exports and AI infrastructure, and it recently formed a strategic partnership with Oneok to bolster its competitiveness in the NGL (natural gas liquid) and natural gas value chains.

MPLX carries a 7.1% forward yield and has low leverage of 3.1 times. It has grown its yearly distribution by 10% or more each of the three past years, making it a solid choice for investors seeking both income and growth.

3. Williams Companies (NYSE:WMB)

Williams Companies owns arguably the most valuable pipeline system in the U.S. in Transco, which connects the natural gas-producing region of Appalachia to the Gulf Coast. Transco is well situated to benefit from several energy market themes, including coal-to-gas switching, increasing LNG demand, and robust power demand coming from AI infrastructure. Williams currently has seven Transco expansion projects set to come online between 2025 and 2029, with a goal to grow its earnings before interest, taxes, depreciation, and amortization (EBITDA) by 8% in 2025 and at a 5% to 7% compounded annual growth rate (CAGR) moving forward.

While Williams doesn't have as high of a yield as some other midstream companies, it has a robust dividend coverage ratio of 2.3x and grew its dividend by 6% last year. This makes it a solid choice for investors looking for a balance of income and growth.

4. Cheniere Energy (NYSE:LNG)

Cheniere Energy is one of the companies best situated to take advantage of increasing LNG export demand. The company owns a nearly 50% stake and the incentive distribution rights (IDRs) in Cheniere Energy Partners, which owns the country's largest LNG export facility in the Sabine Pass in Louisiana. It also directly owns the Corpus Christi LNG terminal in Texas. LNG facilities liquify natural gas so it can be exported overseas, where it is then regasified. IDRs give Cheniere a share of Cheniere Energy Partners' distributions, providing an additional revenue stream.

Demand for LNG continues to grow as a cleaner and cheaper energy source. Export growth is largely driven by Asia, where natural gas prices are much higher than in the U.S. Shell recently forecast that it expects LNG demand to rise by 60% by 2040. Cheniere Energy is in the process of expanding its facilities, starting with its Corpus Christi terminal, which will add three trains (liquidization units) to the facility this year, increasing total Cheniere production capacity by 20%.



Key Factors Driving Demand for Natural Gas and LNG Exports

The demand for natural gas and LNG exports is driven by several key factors, including the growing need for cleaner energy sources, increasing power demand from AI infrastructure, and the global shift towards natural gas as a transition fuel. These trends significantly impact the investment potential of midstream companies like Cheniere Energy and Williams Companies.

1. Growing Demand for Cleaner Energy Sources: Natural gas is increasingly seen as a cleaner alternative to coal and oil, driving demand for LNG exports. Shell recently forecast that LNG demand is expected to rise by 60% by 2040, largely driven by Asia where natural gas prices are much higher than in the U.S. This trend benefits companies like Cheniere Energy, which owns the country's largest LNG export facility in the Sabine Pass in Louisiana and the Corpus Christi LNG terminal in Texas.

2. Increasing Power Demand from AI Infrastructure: The growing power needs for artificial intelligence (AI) infrastructure are also driving demand for natural gas. Companies like Energy Transfer and Williams Companies are particularly well-positioned in regions like the Permian, which is home to a lot of cheap associated natural gas. This provides opportunities for these companies to capitalize on the growing power needs for AI.

3. Global Shift Towards Natural Gas as a Transition Fuel: Natural gas is acting as a transition fuel because it is cleaner than oil. This shift is evident in the acquisition strategies of companies like Enbridge, which has increased its natural gas exposure from 40% of EBITDA to 47% through the acquisition of three utilities from Dominion Energy. This move lowered oil exposure and increased overall natural gas exposure, positioning Enbridge to benefit from the global shift towards cleaner energy sources. Similarly, Williams Companies has seven Transco expansion projects set to come online between 2025 and 2029, which will further enhance its ability to meet the growing demand for natural gas.



Conclusion

Midstream companies are well-positioned to benefit from the favorable political and regulatory environments, as well as the growing demand for energy infrastructure driven by AI and other technological advancements. Energy Transfer, MPLX, Williams Companies, and Cheniere Energy are four brilliant midstream stocks to buy now and hold for the long term. These companies offer attractive yields, strong growth prospects, and strategic positions in key natural gas-producing regions, making them solid choices for investors seeking both income and growth.