With interest rates still at historically low levels, investors remain hungry for income. One area income-seeking investors shouldn't overlook is the oil and gas sector.

While there are a plethora of income options in this sector, including master limited partnerships that are involved mainly in the transportation and storage of oil, natural gas, and natural gas liquids, one company stands out in the upstream space for its phenomenal track record of dividend growth and its strong prospects for cash flow growth.

Alpine Conocophillips

Photo credit: ConocoPhillips.

Strong dividend, strong growth prospects
That company is Houston-based ConocoPhillips (NYSE:COP), the world's largest independent E&P company based on production and proved reserves. ConocoPhillips boasts a dividend yield of 4.1%, which is unparalleled by any other independent E&P, and currently pays a quarterly dividend of $0.69 per share. Since announcing a 2:1 split back in 2005, its quarterly dividend has more than doubled, representing an annual dividend growth rate of 15%.

Notably, Conoco's dividend yield is even higher than some integrated oil companies, which tend to pay out higher dividends because of the greater stability afforded by their business model. For instance, ExxonMobil (NYSE:XOM) has a current dividend yield of 2.7%, while Chevron's (NYSE:CVX) is 3.5%, though BP (NYSE:BP) and Total (NYSE:TOT) both have slightly higher dividend yields than Conoco.

However, these companies' prospects for dividend growth may not be as strong as ConocoPhillips, since most of them are scaling back their spending and lowering their production growth targets. For instance, Exxon and Chevron plan to reduce their exploration and capital spending this year by about $2.7 billion and $2 billion, respectively. Total also plans to cut spending from around $28 billion to $29 billion last year to $24 billion to $25 billion over the next few years, while BP plans to keep spending roughly flat at $24 billion to $25 billion.

Conoco, however, plans to boost its spending by nearly $1 billion this year and is expecting 3%-5% annual production growth over the next few years, as compared with just 1%-3% for the other majors I mentioned. While I do expect the majors to also continue to grow their dividends, I think Conoco's prospects for dividend growth are slightly better, thanks to its leading position in liquids-rich U.S. resource plays.

Increasingly liquids-weighted growth
These plays, which include North Dakota's Bakken shale, South Texas' Eagle Ford shale, and West Texas' Permian Basin, drove 24% year-over-year growth in the company's Lower 48 oil production during the fourth quarter. This helped boost the liquids share of the company's production from 48% to 52%. Conoco's reserves are becoming more liquids-weighted as well.

Of the approximately 1.1 billion barrels of reserves the company added last year, liquids represented roughly 60% of the reserve additions, while an additional 15% were tied to liquids pricing through liquefied natural gas (LNG). As of year-end 2013, roughly half of the company's total proven reserves were consisted of liquids.

This increased focus on liquids is already translating into solid improvements in the company's bottom line. Because of the higher margins associated with oil and natural gas liquids production, Conoco's full-year 2013 cash margins improved by $2.91 per barrel of oil equivalent to $28.55 per BOE, representing 11% year-over-year growth.

As Conoco's production becomes even more weighted toward liquids, margins should continue to improve at an annual rate of 3%-5% over the next five years. This should drive much stronger returns and cash flow in the coming years, allowing for continued dividend growth.

A compelling dividend opportunity
Over the past few years, ConocoPhillips has rebalanced its portfolio to concentrate on higher-margin, liquids-rich assets in the U.S., while divesting riskier, lower-margin assets abroad. The company's strong oil-weighted production growth over the next few years should ensure continued dividend growth.

Further, proceeds from Conoco's $14 billion of asset sales to date provide additional cushion for it to keep raising its dividend in case commodity prices see a sustained decline. For these reasons, I think Conoco presents a compelling and relatively low-risk opportunity for income-seeking investors.

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Arjun Sreekumar has no position in any stocks mentioned. The Motley Fool recommends Chevron and Total. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.