Although CenterPoint Energy (NYSE:CNP) stock made a hard landing after energy prices collapsed in 2015, the utility holding company has clawed its way back. That's a lot easier to do when you have a few advantages over other energy stocks.

The company doesn't own any power-generation assets, which greatly reduces exposure to environmental regulatory risks compared to vertically integrated utilities. The regulated nature of electricity transmission and distribution and natural gas distribution provides some reprieve from volatility while allowing predictable revenue and cash flow growth for years into the future. Meanwhile, two recent acquisitions within non-regulated competitive natural gas supply provide access to higher growth opportunities.

While that should allow CenterPoint Energy stock to grow in the next 10 years, the biggest catalyst for the company in the next decade may be the performance and growth of another company: Enable Midstream Partners LP (NYSE:ENBL).

Electric power transmission lines.

Image source: Getty Images.

Recovery and acquisitions driving growth

CenterPoint Energy rode increased rates, customer growth, and lower interest expenses to year-over-year growth in the first quarter of 2017. An unusually warm winter had a slightly negative impact on electric transmission and distribution, but the overall business performed well thanks to strength in the energy services segment. 

Metric

Q1 2017

Q1 2016

Change (YOY)

Electric transmission and distribution revenue

$639 million

$660 million

(3.2%)

Natural gas distribution revenue

$907 million

$888 million

2.1%

Energy services revenue

$1.18 billion

$432 million

174%

Electric transmission and distribution operating income

$78 million

$83 million

(6.1%)

Natural gas distribution operating income

$164 million

$160 million

2.5%

Energy services operating income

$35 million

$6 million

483%

Data source: SEC filings.

While acquiring Atmos Energy Marketing and part of Continuum in the past 12 months provided a jolt to the revenue and operating income of the energy services segment, much of the year-over-year increase in operating income ($24 million of the $29 million increase) came from some accounting changes to the fair market value of several assets. 

In other words, it's a short-term gain that won't be replicated every quarter. So, although the energy services segment could provide access to higher-growth opportunities compared to rate-regulated markets, investors should expect the overall contributions to be representative of achievements to date: Slow and steady growth that underwhelms in the short term and adds up in the long run.

CNP Chart

CNP data by YCharts.

The good news is investors should be pretty confident in CenterPoint Energy's ability to continue racking up low- to mid-single-digit growth for the foreseeable future, perhaps for one simple reason: geography. The company's core focus in Texas places it smack dab in one of the highest-growth metropolitan areas in the nation -- Houston, where its electric utility is based -- and some of the lowest-cost natural gas reserves in the world. New pipeline infrastructure will help natural gas continue to make inroads in the region, and provide new opportunities for residential and commercial customer growth.

Then again, the region also provides unique opportunities for industrial customer growth. In fact, the dividend stock announced that it has proposed a $250 million transmission project to address continued growth from the petrochemical industry. Regulators are expected to announce a decision by the end of 2017. Considering that the grid will be overwhelmed without additional capacity, it's likely to be approved, which will boost CenterPoint Energy's electricity transmission business for decades to come.

Ample opportunities for steadily growing electric and natural gas utility businesses are great for long-term investors, but the biggest mover for the stock in the next 10 years likely will be its midstream investment in Enable Midstream Partners LP.

Huge bet on midstream

CenterPoint Energy owns 50% of the management rights in the midstream operator's general partner, 40% in the incentive distribution rights, and 14.5 million Series A preferred units. Simply put, Enable Midstream Partners LP injects a considerable amount of earnings and cash flow into the utility holding company each and every quarter. 

Although the midstream investment isn't consolidated (CenterPoint Energy uses the equity method of accounting), it's beginning to contribute an outsized portion of EPS growth. Consider full-year 2017 financial guidance compared to 2016 results: 

Metric

2017 Expected

2016 Actual

Change (YOY)

Adjusted EPS from utility operations

$0.93 to $0.97

$0.88

5.6% to 10.2%

Adjusted EPS from midstream investments

$0.31 to $0.37

$0.28

10.7% to 32.1%

Total adjusted EPS

$1.25 to $1.33

$1.16

7.7% to 14.6%

Data source: SEC filings.

Barring unforeseen changes in the energy market, the investment in Enable Midstream Partners LP could easily outstrip growth from utilities businesses for the next decade. The midstream operator entered 2017 with more than twice the natural gas processing capacity of its next largest peer in the region. That was before announcing 600 million cubic feet per day of additional projects in the first half, which is nearly equivalent to the total processing capacity of its largest peers. 

Transporting natural gas from the Anadarko Basin promises to be an enormous long-term opportunity. Why? It provides access to the Midwest, Gulf Coast, and Southeast grids. Few companies may be better positioned to capitalize than Enable Midstream Partners LP, which owns 12,900 miles of natural gas gathering systems, 14 processing plants, 7,800 miles of interstate pipelines, and 85 billion cubic feet of storage capacity. A squeaky clean balance sheet, healthy operating cash flow, and vast infrastructure networks already in the ground promise to make the investment highly profitable for CenterPoint Energy for years to come.

Where will CenterPoint Energy be in 10 years?

Continued growth in the low- to mid-single digits for the utility business shouldn't be taken for granted. Natural gas growth and increasing demand from industrial customers in the petrochemical industry promise to keep the dividend stock humming along, slowly but surely, in the near and medium term. Meanwhile, the company's big midstream investment could prove to be the real driver of growth. Put it all together, and I think investors will be pretty pleased with where CenterPoint Energy stock ends up in 10 years.

Maxx Chatsko has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.