CNX Midstream (NYSE:CNXM) is a little-known natural gas gathering company focused on the Marcellus shale. However, what the master limited partnership (MLP) lacks in name recognition, it makes up for growth potential. Thanks to the drilling plans of its natural gas-producing parent, CNX Resources (NYSE:CNX), the company is on pace to grow its 6.4%-yielding distribution to investors at an impressive 15% annual rate for the next several years. That high-yield dividend, when combined with a high growth rate, has the potential to turn a small up-front investment into an impressive income stream in the next five years if everything goes according to plan.

Drilling down into the numbers

CNX Midstream is on pace to generate $120 million to $135 million in distributable cash flow (DCF) this year, which is money the company could pay out to investors. While the MLP plans to increase its distribution to investors by 15% this year, it will still only distribute between 71% to 83% of its DCF, leaving it with a comfortable coverage ratio of 1.2 to 1.4 times.

A light bulb next to stacks of coins and a calculator.

Image source: Getty Images.

CNX Midstream currently estimates that it can grow DCF at a high enough rate to support 15% annual distribution growth all the way through 2023. Using that assumption, here's a look at the income an investor could generate using several different starting points:

Number of Shares Purchased at $18.75 Apiece

Total Initial Investment

Potential Income in Year 1

Potential Income in Year 2

Potential Income in Year 3

Potential Income in Year 4

Potential Income in Year 5

Cumulative Potential Income

1

$18.75

$1.44

$1.66

$1.91

$2.19

$2.52

$9.72

100

$1,875.00

$144.12

$165.74

$190.60

$219.19

$252.06

$971.70

250

$4,687.50

$360.30

$414.34

$476.49

$547.96

$630.16

$2,429.25

500

$9,375.00

$720.59

$828.68

$952.98

$1,095.93

$1,260.32

$4,858.49

Data source: CNX Midstream and author's calculations.

As that table shows, a less than $10,000 initial investment could yield more than $1,250 in annual income within five years. That's a yield of more than 13% on that starting point.

What's fueling this growth?

CNX Midstream and its producing parent, CNX Resources, made several baseline assumptions to support this growth plan. First, CNX Resources expects to run two to three drilling rigs on land near infrastructure owned by CNX Midstream. This will fuel 23% compound annual growth in the volumes flowing through that system, which the company will expand as new wells come online. CNX Midstream will collect fees for gathering that steadily increasing natural gas production, which should provide it with the revenue needed to support 15% compound annual distribution growth even as the company maintains a conservative 1.3 times distribution coverage ratio and a leverage ratio of less than 2.5 times, well below the average.

That initial outlook didn't assume any additional development activities, acquisitions, or volumes from third-party producers, which all represent upside to that plan. However, one opportunity recently emerged after CNX Resources closed an exchange transaction with another producer that helps strengthen CNX Midstream's portfolio and outlook. As part of the deal, CNX Resources now expects to drill more wells that will feed into its MLP's gathering system. In addition, the company will acquire a new pipeline that will expand and diversify its business since third-party producers are among the customers on that line. This transaction not only increases the likelihood that CNX Midstream can grow its payout at a 15% annual rate through 2022 but extends that outlook another year to 2023. With several other potential opportunities in the pipeline, CNX Midstream could further enhance and lengthen its growth outlook in the coming years.

The potential to be an excellent income growth stock

CNX Midstream isn't a flashy company since it quietly gathers natural gas from a growing number of wells for a fee. Those fees, however, add up and are growing at a healthy clip. That puts the company in the position to increase its high-yielding payout at a high rate for the next several years. Because of that, the company could turn a small up-front investment into a significant future cash flow stream, making it an ideal option for income-seeking investors to consider.

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