Plains All American Pipeline has executed a strategic pivot, prompting dividend investors to question whether the company can sustain its 9% yield and continue raising payouts. The Houston-based midstream giant operates crude oil pipelines, terminals, and storage facilities across the United States and Canada.
Following recent transactions valued in the billions, the company is now focusing entirely on crude oil operations to achieve more stable cash flows and stronger distribution growth. Plains has completed two significant deals that fundamentally alter its business profile.
The company acquired full ownership of the EPIC Crude pipeline system for approximately $1.3 billion, including about $500 million in debt. This purchase occurred in two stages: a 55% stake was bought from Diamondback and Kinetik, followed by the remaining 45% operating interest from an Ares private equity portfolio company.
Plans are underway to rename the system Cactus III and integrate it with existing Cactus long-haul infrastructure. CEO Willie Chiang described the EPIC acquisitions as "highly synergistic and very strategic," projecting mid-teens unlevered returns. Management anticipates a 2026 adjusted EBITDA multiple of roughly 10 times, expecting meaningful improvement in subsequent years.
Concurrently, Plains is selling its entire Canadian NGL business to Keyera for $5.15 billion. This transaction is scheduled to close by the end of the first quarter of 2026, pending regulatory approvals. Two of the three required approvals—U.S. Hart-Scott-Rodino and the Canadian Transportation Act—have been secured, while the Canadian Competition Bureau approval process continues.
The EPIC acquisition provides Plains with operatorship control, accelerating synergy capture across the system. Near-term benefits include contractual step-ups, reduced operating costs and overhead, quality optimization opportunities, and better utilization of Plains' existing Permian and Eagle Ford asset base. Long-term, the system offers expansion capacity that could provide additional Gulf Coast access as demand grows.
Executive Vice President Jeremy Goebel noted that a substantial portion of EPIC's contracts are long-term, with medium-duration agreements covering the balance. The pipeline operates at current market rates, positioning it for stable and growing cash flows. According to CFO Al Swanson, the EPIC acquisition extends Plains' weighted average contract duration from 2028 to October 2029.
Management expects to capture synergies quickly, with many benefits materializing in 2026. Cost structure savings, overhead reductions, and integration with existing systems present immediate opportunities. Operating the pipeline directly gives Plains control over partial expansions as market conditions dictate. Goebel emphasized that much of the synergy capture is "contractual and immediate," including step-ups in contracts and cost savings. Beyond that, Plains can optimize across its gathering, intrabasin, and long-haul systems.
Additional value drivers include quality optimization, capital avoidance through underutilized laterals, and increased flexibility for customers. Regarding dividends, Plains ended 2025 with a quarterly dividend of $0.38 per share, up from $0.18 per share in 2021. The company has more than doubled its dividend over the past four years.
Since January 2021, PAA stock has returned 85% to shareholders. Adjusted for dividend reinvestments, cumulative returns approach 170%, with dividends accounting for 50% of cumulative returns during this period. Analysts forecast annual dividends increasing to $1.88 per share by 2028.
Swanson stated the company would "look through noise" when evaluating distribution increases, focusing on run-rate distributable cash flow rather than temporary timing issues related to asset sales. The NGL divestiture should close in the first quarter, with proceeds largely redeployed through the EPIC acquisition. Management expects the trade to be "substantially DCF accretive over time."
Due to timing differences between closing dates, Plains' leverage ratio will temporarily exceed its 3.5 times target range. Once the NGL sale finalizes, leverage should trend toward the midpoint. After reaching target coverage, Plains will shift to a DCF growth-based distribution model. The embedded growth in EPIC, combined with multiple compressions from 10 times to mid-teens unlevered returns, provides meaningful runway.
Plains faces near-term headwinds that could pressure cash flows. Certain Permian long-haul contract rates reset to market in September, with the full impact hitting in the fourth quarter. Management identified this quarter as the new baseline for lower contract rates out of the Permian. On volumes, the outlook for 2026 remains unclear. Chiang acknowledged that predicting next year's Permian growth is "really tough," citing mixed signals from producers.
While two major operators continue to grow steadily, others have taken a "stoplight approach." Plains will not provide detailed 2026 guidance until February. Despite near-term uncertainty, Plains remains bullish on North American crude fundamentals. Management pointed to continued global energy demand growth, underinvestment in organic oil supply, and diminishing OPEC+ spare capacity as structural tailwinds.
Chiang highlighted that organic reserve replacement has fallen below 100%, creating long-term support for North American production. Plains also sees opportunities beyond the Permian, including potential Canadian crude egress projects. The company's Capline pipeline from Patoka to the Gulf Coast has significant spare capacity that could help move additional Canadian barrels to export markets.