Crestwood Equity Partners (NYSE:CEQP) currently yields a dreamy 10.3%. While a yield in the double digits is typically a sign of trouble, that's not the case with Crestwood. If anything, the pipeline and processing company's payout and growth prospects have only grown stronger this year, thanks to its ability to complete several strategic initiatives. As a result, the company is a dream stock for income seekers since it offers an ultra-high yield that's becoming increasingly safe and probably heading higher.

Drilling down into the numbers

During the third quarter, Crestwood Equity Partners generated $50.3 million in distributable cash flow (DCF), which is money it could pay out to investors during the quarter. However, despite sporting an ultra-high yield, the company didn't come close to exhausting its available resources in paying its current distribution to investors, since it covered the payout with cash flow by a comfortable 1.2 times. The company subsequently had some money left over to help finance growth projects. Those results kept it on pace to generate between $210 million to $230 million in DCF for the full year, which should cover its lucrative distribution by 1.2 to 1.4 times.

Pipelines on green grass heading towards the blue sky.

Image source: Getty Images.

Not only can Crestwood easily cover its current payout, but its balance sheet is also on solid ground. The company ended the quarter with a 4.1 leverage ratio and expected that metric to be between 4.0 to 4.5 this year. That's in line with the levels of some of the top-tier MLPs:

MLP

Current Leverage Ratio

Target Ratio or Average Tange

Enterprise Products Partners (NYSE:EPD)

3.8

Since 2009, Enterprise's leverage has been between 4.4 and 3.5

Williams Partners (NYSE:WPZ)

4.5

Williams Partners wants to keep leverage at 4.5 or less

Plains All American Pipeline (NYSE:PAA)

4.7

Plains' target is to get leverage to 3.5 to 4.0 by 2019

Magellan Midstream Partners (NYSE:MMP)

3.5 

Magellan's target is to keep leverage below 4.0

Data sourcees: Enterprise Products Partners, Williams Partners, Plains All American Pipeline, and Magellan Midstream Partners.

Meanwhile, Crestwood's financial situation is about to get even stronger because the company recently agreed to sell its non-core U.S. Salt business for $225 million in cash. Crestwood initially plans to use those proceeds to pay down its credit facility. However, that will free up money so the company can finance its current slate of growth projects through the end of next year without needing to issue any more equity. As a result, it expects the deal to bolster DCF per unit between 3% to 5% by 2019.

Visible growth on the horizon

However, those incremental earnings are just a sample of what Crestwood has in the pipeline, since it has several expansion projects under construction. The first of them to enter service was the Nautilus gas-gathering system in the Delaware Basin, which has already started gathering natural gas from Royal Dutch Shell's (NYSE:RDS-A)(NYSE:RDS-B) wells in the region. Shell signed a 20-year fixed-fee contract supporting that system, enabling Crestwood to collect steady cash flow for years to come. Furthermore, Shell's midstream arm, Shell Midstream Partners (NYSE:SHLX), recently bought a stake in that entity, which not only handed over a portion of the financial burden for the future expansion of that system but also provided Crestwood with some incremental cash to finance some of its other projects. 

One of those developments is the first phase of the Bear Den processing plant in the Bakken, which it expected to start up shortly after the third quarter ended. That facility will separate raw natural gas into higher-valued natural gas liquids for producers in the area, earning Crestwood a fee as it processes those volumes. Meanwhile, the company expects to bring the second phase of that project online by the end of next year, while finishing a similar plant in the Delaware Basin by the third quarter of 2018.

Crestwood anticipates that these projects will provide it with $30 million in incremental cash flow next year, which should ramp up to $75 million in annualized cash flow by 2020. Those increasing earnings, when combined with less capital spending as it winds down its current expansion phase, gives the company the confidence that it will have the financial flexibility to start increasing its already lucrative payout in the second half of 2018. Given the sheer magnitude of the anticipated cash flow growth, it's possible Crestwood could boost its payout by a double-digit annual rate in the coming years while still maintaining a healthy balance sheet and coverage ratio.

A windfall of income and upside could be just over the horizon

Crestwood is a dream stock for income investors because it offers them an increasingly secure high-yield payout with highly visible growth prospects. That positions them to collect a boatload of income with the potential to capture significant capital gains not only as its earnings rise but also as the market revalues the company closer to its peer group average instead of its current absurdly low price. That income with upside makes Crestwood a stock that investors shouldn't just dream about but consider adding it to their portfolio.

Matthew DiLallo owns shares of Enterprise Products Partners. The Motley Fool recommends Enterprise Products Partners and Magellan Midstream Partners. The Motley Fool has a disclosure policy.