Bill Gross Reassesses MLP Strategy as Pipeline Stocks Peak—What High-Yield Investors Should Know

The legendary investor known for his mastery of yield-focused investments is recalibrating his stance on master limited partnerships (MLPs). Bill Gross, the renowned “Bond King” and co-founder of PIMCO with a net worth around $1.7 billion, has been a vocal advocate for MLPs as a source of tax-advantaged income. Recently, however, his enthusiasm appears to be wavering.

In a recent post on X, Gross shared his updated perspective: “MLP pipelines seem to be topping. Hold if you like 6.5% tax-deferred yields. Sell if you own too much. I own less than I did 2 days ago.” This statement signals a shift in his investment approach, raising questions about whether income-focused investors should follow suit.

The Surge in Pipeline Stocks and Its Drivers

Over the past twelve months, pipeline and energy infrastructure stocks have experienced remarkable growth. Natural gas pipeline operators have emerged as significant beneficiaries of multiple structural trends reshaping the energy landscape. The anticipated acceleration in natural gas consumption stems from several powerful demand catalysts: the explosive growth of AI-powered data centers requiring substantial electricity, the reshoring of manufacturing operations to domestic markets, and the accelerating electrification of transportation and industrial processes.

These factors collectively suggest a meaningful uptick in electricity demand, which in turn necessitates increased natural gas generation capacity. Pipeline companies are already positioning themselves to capitalize on this opportunity. Kinder Morgan (NYSE: KMI), a dominant force in natural gas transportation, has secured commercial agreements to move forward with three major expansion projects representing approximately $5 billion in capital investment (the company’s share) over recent months. Similar expansion plans are underway across the midstream sector as operators prepare for anticipated demand surges.

The investment community’s recognition of these long-term growth prospects has driven substantial capital flows into pipeline equities. As demand intensifies and capital chases these opportunities, valuations have expanded considerably while dividend yields have compressed from their levels a year ago.

Understanding Gross’ Recalibration

Bill Gross’ recent comments reflect his assessment that the valuation expansion cycle may be moderating. While he hasn’t abandoned MLPs entirely, he is reducing his exposure to certain holdings. His continued appreciation for MLPs stems from their distinctive income characteristics, particularly the tax-deferred nature of distributions. Even at current levels, investors can access compelling income streams through quality MLP operators.

Energy Transfer (NYSE: ET), which has previously attracted Gross’ attention, exemplifies this income opportunity with a current distribution yield of 6.5%—substantially higher than the S&P 500’s yield of approximately 1.2% and more attractive than traditional pipeline corporations like Kinder Morgan, which currently yields 4.3%. Energy Transfer has mapped out annual payout growth of 3% to 5%, supported by several significant expansion initiatives including the recently sanctioned $2.7 billion Hugh Brinson pipeline project and ongoing development of a major liquefied natural gas (LNG) export facility.

Western Midstream Partners (NYSE: WES) represents another compelling MLP alternative, offering an even more generous yield of 8.7%. Through strategic acquisitions and asset optimization, the company has strengthened its operational footprint and financial position, creating substantial room for ongoing distribution growth.

MPLX (NYSE: MPLX) rounds out the high-yield MLP category with a 7.2% distribution yield. The partnership has demonstrated remarkable payout discipline, growing distributions at more than 10% annually since 2021. Its robust financial foundation and expanding backlog of projects extending through 2029 position it well for sustained distribution increases.

The Investment Decision: When to Hold, Trim, or Exit

Despite the impressive rallies these partnerships have delivered, they retain considerable appeal for income-focused portfolios. Each offers financial strength that supports both operational expansion and distribution growth. For investors prioritizing tax-efficient passive income—and willing to navigate the additional complexity of Schedule K-1 tax reporting—these MLPs remain valuable portfolio components.

Some investors may consider this an appropriate moment to harvest gains accumulated over the past year, particularly if MLP positions have grown to represent an outsized allocation. However, characterizing current levels as unattractive would be premature. While valuations have clearly adjusted from the bargain territory of twelve months ago, quality operators continue offering compelling risk-adjusted income opportunities.

The distinction Bill Gross appears to be making is nuanced: MLPs remain worthy holdings, yet they’ve transitioned from obvious bargains to fairly valued income vehicles. This positioning—hold for the income, trim if overweighted—represents a measured approach that acknowledges both the structural tailwinds supporting these businesses and the cyclical valuation pressures from recent enthusiasm.