Pipeline companies are ideal long-term investments. Most pipeline operators sell capacity under long-term contracts or government-regulated rate structures, which give them a clear view of future cash flows. At the same time, energy demand continues to grow, which will allow these companies to continue to expand their systems.
ambridge(NYSE: ENB), Kinder Morgan(NYSE: KMI)and williams(NYSE: WMB) are three of them The Best Pipeline Stocks to Buy Right Now. They generate durable cash flows to support high-yielding dividends. In the meantime, they have a lot of visible growth coming. They can provide investors with a lifetime of steadily growing dividend income.
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Enbridge is North America’s leading energy infrastructure company. canadian pipelines and utility operator Transports 30% of North America’s crude oil and 20% of the natural gas consumed in the United States. It also operates the largest natural gas utility franchise and is a leading natural gas utility company renewable energy Producer.
The company has a low-risk business model, with more than 90% of revenue coming from regulated interest rate structures or take-or-pay contracts, providing it with very stable cash flow. Enbridge spends 60% to 70% of its stable cash flow on dividends (currently yielding 5.6%). This allows it to retain billions of dollars in excess cash flow each year to fund expansion projects.
Onkyo has Rich expansion project in the backlog. Its commercially secured projects are scheduled to come online early next decade. These projects will increase Enbridge’s cash flow per share by 3% this year and about 5% annually after 2026. This should support a similar dividend growth rate. The company has increased its dividend (in Canadian dollars) for 31 consecutive years.
Operated by Kinder Morgan largest The U.S. natural gas transmission network transports 40% of the country’s production. It also operates refinery products pipelines, terminals and carbon dioxide infrastructure.
The pipeline company has locked up 70% of its annual cash flow in take-or-pay contracts and hedging agreements. Meanwhile, another 26% comes from stable fee-based contracts. The company devotes less than 50% of its stable cash flow to dividends, retaining the remainder to fund expansion projects.
Kinder Morgan currently has a backlog of $10 billion in commercial secured expansion projects, which it expects to complete by 2030. The company is seeking an additional $10 billion in projects to further enhance and expand its growth visibility. Growing cash flows from these projects will allow Kinder Morgan to continue growing its high-yield dividend (currently yielding 3.6%), which it has done continuously for the past nine years.
Williams is a leading natural gas infrastructure company. It processes one-third of the natural gas produced in the United States, which puts the company well-positioned to take advantage of an expected 35% increase in natural gas demand over the next decade.
The company is currently investing $15.5 billion in growth capital projects, which it expects to complete by 2033. In addition to building pipelines and related infrastructure, Williams is investing $7 billion in four gas-fired generation innovation projects to support the growing power needs of data centers and other customers.
These investments give Williams confidence that its earnings can grow by more than 10% annual rate By 2030. This should give the company plenty of incentive to continue growing its 2.9% dividend yield. Williams has paid dividends for more than 50 consecutive years, with dividend growth rates exceeding 5% compound annual interest rate Since 2020.
Enbridge, Kinder Morgan and Williams generate very stable and steadily growing cash flows, driven by growing energy demand. The coming power surge and growing power demand driven by AI data centers should allow these pipeline companies to continue growing cash flow and dividends for many years to come. This makes them excellent pipeline stocks to buy and hold for potential passive income.
Before buying Enbridge stock, consider the following factors:
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Matt DiLallo is with Enbridge and Kinder Morgan. The Motley Fool owns and recommends Enbridge and Kinder Morgan. The Motley Fool has a disclosure policy.
3 High-Yield Pipeline Stocks to Buy Now and Hold Forever originally published by The Motley Fool
