Core Insights - Pipeline stocks are favored by income investors due to their reliable dividends and stable fee-based income, which is largely independent of fluctuating oil and gas prices [1][2] Industry Overview - The U.S. has seen a significant increase in oil and natural gas production, reaching a record of 13.6 million barrels of oil per day in 2025 [4] - U.S. dry natural gas production also hit record levels in 2024, exceeding 37.7 trillion cubic feet, solidifying the U.S. position as the top global LNG exporter since 2023 [5] Company Analysis: Enterprise Products Partners (EPD) - Enterprise Products Partners operates over 50,000 miles of pipelines and is one of the largest pipeline operators in the U.S. with a market cap of $76 billion [7] - The company is expanding its infrastructure with 900 million cubic feet per day of new Permian gas-processing capacity expected by mid- to late 2026 [8] - EPD has a strong dividend history, having raised its payout for 27 consecutive years, with a current dividend yield of 6.18% [9] Company Analysis: Kinder Morgan (KMI) - Kinder Morgan operates the largest natural gas pipeline network in North America, covering over 66,000 miles and accounting for about 40% of all natural gas transported in the U.S. [11] - The company has significant connections to major supply basins and demand centers, which are crucial for meeting growing natural gas demand, particularly from data centers [12] - KMI has a market cap of $67 billion and offers a dividend yield of 3.89% [10][11]

Market Overview - Markets rebounded in Q2 2025 after a correction in Q1, overcoming tariff concerns and geopolitical tensions, with solid gains reported [2] - The U.S.-China trade situation improved, leading to lower tariffs and increased exports of rare earth metals from China to the U.S. [2] - The end of a conflict between Israel and Iran in June further supported market sentiment [2] Infrastructure Performance - Listed infrastructure showed resilience during market volatility, outperforming the broader market in April and maintaining stability through May and June [3] - Western Europe emerged as the strongest regional performer, benefiting from interest rate cuts by the European Central Bank and Germany's fiscal stimulus focused on infrastructure spending [4] Key Contributors - E.On, a leading German electric utility, was the top performer in Western Europe, supported by structural reforms and significant grid investment potential [5] - French toll road operator Vinci also performed well, aided by positive operational momentum and significant free cash flow generation [6] Detractors - U.S. energy infrastructure company ONEOK and Canadian company Pembina Pipeline were the largest detractors, primarily due to OPEC+ decisions affecting oil prices [7] - Pembina Pipeline's performance was impacted by market concerns over toll renegotiations, although it remains a leader in the growing Western Canadian Sedimentary Basin [8] Outlook - The current environment is characterized by volatility, but confidence remains in utility and infrastructure assets for generating consistent cash flows [9] - Infrastructure investments are expected to benefit from inflation pass-through mechanisms, with approximately 90% of the portfolio linked to such mechanisms [9] Portfolio Highlights - The strategy saw positive contributions from six out of seven sectors, with electric utilities, airports, water, and toll roads being the top contributors [13] - The top individual stock contributors included Constellation Energy, E.On, Severn Trent, SSE, and Vinci, while ONEOK and Pembina Pipeline were the main detractors [14]