Williams Companies (WMB 0.62%) generated $371 million in cash flow available for dividends during the first quarter of 2018, which was enough money to cover its payout by a comfortable 1.32 times. That's after factoring in the 13.3% increase the company announced earlier this year, which boosted its yield up to 5.3%. The main source of this income continues to be its majority-owned master limited partnership Williams Partners (NYSE: WPZ), which delivered another solid quarter.

Drilling down into the results

Williams Partners delivered across-the-board growth during the first quarter:

A chart showing Williams Partners earnings by segment in the first quarters of 2018 and 2017

Data source: Williams Partners. Chart by author.

Williams' biggest earnings source continues to be the Atlantic-Gulf segment, which houses its crown jewel Transco Pipeline. That system added $58 million in EBITDA during the first quarter due to the recent completion of several expansion projects. It more than offset the $29 million in lost income as a result of declining volumes at the company's Discovery joint venture in the Gulf of Mexico.

Earnings in the West segment also expanded during the first quarter, thanks in part to higher volumes on nine of the company's 10 gathering systems. Those more than offset lower rates on its Northwest Pipeline.

Meanwhile, earnings in the Northeast gathering and processing (G&P) segment rose sharply, due in large part to higher volumes at two of the company's hubs in the region, as well as the acquisition of two gathering systems in the Marcellus shale last year.

The growth across these three segments helped offset the absence of income from the now defunct NGL (natural gas liquids) and petchem (petrochemical) services segment, after the company sold off those assets over the past year. Overall, the company produced $1.122 billion in adjusted EBITDA during the first quarter, along with $784 million in distributable cash flow; these figures were up 0.4% and 4.3%, respectively, year over year.

A pipeline on a mountain

Image source: Getty Images.

A look at what lies ahead

Williams Partners' solid start to the year has it on pace to achieve its full-year guidance. That forecast would see the company generate between $4.45 billion to $4.65 billion in adjusted EBITDA this year, up 1.7% at the midpoint from last year. Distributable cash flow, meanwhile, would increase by more than 8% to a range of $2.9 billion to $3.1 billion. That's enough money to grow the MLP's distribution to investors by 5% to 7% this year, while maintaining a comfortable coverage ratio of 1.2.

The company expects earnings growth to accelerate over the next year with the upcoming completion of the Atlantic Sunrise and Garden State expansions to the Transco system; these should add an incremental $425 million in annual EBITDA. Earnings growth from those and other projects will have Williams Partners on pace to continue increasing its 6.8%-yielding payout at a 5% to 7% annual rate through at least the next year. That growing income stream should provide parent Williams Companies with enough fuel to raise its dividend at a 10% to 15% yearly rate over that time frame.

Williams Partners did note that it has identified several new expansion projects that should drive earnings growth in 2019 and beyond, which it intends on detailing at its Analyst Day later this month. These expansions could allow both companies to continue increasing their respective payouts at healthy rates beyond next year.

A strong start, with plenty more to come

After hitting a speed bump last year due to asset sales, Williams Partners' earnings growth engine is reaccelerating thanks to recently completed growth projects. With several more expansions in the pipeline, the company expects to continue growing for at least the next two years, positioning it to increase its payout each quarter. That growing income stream will provide Williams Companies with more cash to pay dividends, which makes both Williams Companies and Williams Partners solid options for income-seeking investors.