Shares of Kinder Morgan (KMI) are scorching hot, up nearly 50% so far in 2016, after being left out in the cold last winter due to a dividend cut. Skip Aylesworth, co-portfolio manager of the Hennessy Gas Utility Fund (GASFX) , likes the pipeline player's prospects from here.
"They successfully reorganized by simplifying their corporate structure and lowering the dividend. And the result is the ability to self fund most of its capital needs," says Aylesworth.
The Hennessy Gas Utility Fund is up 24% thus far in 2016, according to Morningstar. The $1.5 billion fund has returned an average of 10.6% annually over the past three years, outpacing 73% of its rivals in Morningstar's utilities category. The trailing 12-month yield for the fund is 2.4%, according to Morningstar.
TransCanada (TRP) , up 48% year to date, is the oil and gas player best known for the political Keystone pipeline. The company is also a major power producer north of boarder and is aiming to be a major North American energy infrastructure company. Aylesworth said the Calgary, Canada-based company's purchase of the Columbia Pipeline Company will successfully expand its American footprint.
Along with TransCanada, Enbridge (ENB) is a major Canadian pipeline player having a good year, up 33% year to date. Unlike TransCanada, Enbridge has little if any power generation, but its recent purchase of Spectra will "enhance its pipeline footprint to include Mexico and the Pacific Northwest."
Finally, back home in the U.S., Aylesworth likes MGE Energy (MGEE) , up 26% this year, calling it a "tried and true power-generation utility." The company produces and distributes electricity and distributes natural gas in its service territory of Wisconsin.
"MGE is a true tortoise in the volatile field of hares," says Aylesworth. "It has increased its dividend over the last 41 years and is S&P and Moody's highest-rated investor-owned utility in the U.S. Plus it has no commodity exposure."