It's rare to find well-paying dividend stocks that can also grow at a rapid pace. That's why Enbridge (ENB -0.63%), MPLX (MPLX -1.02%), and EQT Midstream (EQM) stand out: Each offers a compelling current yield, which should grow by double digits this year. That combination could fuel market-beating total returns -- the kind of upside dividend-growth investors won't want to miss.
Almost an Aristocrat
Last fall, Canadian pipeline giant Enbridge announced that it would increase its dividend 10% for 2018. That pushes the company's dividend-growth streak to an impressive 23 years, which is just two shy of the years necessary to become a Dividend Aristocrat. Enbridge fully expects to lay claim to that title in 2020 since it also plans to increase its payout 10% in 2019 and 2020. Those future increases will push Enbridge's already impressive 4.7%-yielding dividend even higher.
Fueling Enbridge's fast-growing dividend are 22 billion Canadian dollars ($17.5 billion) of high-return expansion projects currently underway. The company expects recently completed expansions and those coming on line this year to increase its available cash flow from operations by about 15% in 2018. That puts the pipeline giant on pace to grow cash flow by at least a 10% compound annual rate per share through 2020, providing it with the fuel to keep raising the dividend.
The transformation is nearly complete
MPLX is coming off a game-changing year after the master limited partnership (MLP) completed several strategic transactions with parent company Marathon Petroleum (MPC -3.85%). Those moves included three separate dropdown acquisitions from Marathon, which enabled MPLX to acquire the remaining logistics assets held by its parent in deals that will significantly increase the MLP's earnings and cash flow in 2018. In addition, Marathon agreed to eliminate a costly management fee in exchange for an increased stake in the MLP.
These moves position MPLX for growth in 2018 and beyond. Overall, the company expects to increase its already lucrative 5.8%-yielding distribution to investors by 10% this year. Even with that increase, the company plans on retaining enough excess cash flow to finance $2 billion of growth projects, which sets the stage for cash flow and distribution growth.
Visible growth with a potential catalyst
EQT Midstream currently expects to increase its 4.75%-yielding distribution to investors by 15% to 20% for the next several years, including 2018. Fueling that growth will be the organic growth projects it's developing to support the rapidly rising natural gas production of parent company EQT Corp. (EQT -3.88%).
That said, EQT Midstream's 2018 plan assumes that it remains a stand-alone entity, which might not be the case for much longer. EQT Corp. acquired another large gas producer last year, which brought with it several wholly owned midstream assets, along with a stake in Rice Midstream Partners. EQT Corp. is currently considering its options and could drop down the midstream assets to EQT Midstream, as well as combine the company with the equally fast-growing Rice Midstream Partners. If the company does both, it could potentially enable EQT Midstream to deliver higher-end distribution growth in 2018 and beyond.
The fuel for above-average returns
All three of these companies have one thing in common: an expectation that cash flow will grow double digits this year as a result of recent acquisitions or growth projects. That growing cash flow stream will enable them to increase their already above-average payouts by at least 10% in 2018, with growth at or above that rate likely in the coming years. That combination of a mid-single-digit yield and double-digit earnings growth could enable these pipeline companies to deliver total returns in the mid-teens this year. That makes them great options for investors looking for income stocks that also have the potential to produce market-beating total returns.