Antero Midstream (AM 0.68%) already richly rewards its investors via a high-yielding dividend that currently yields 7.4%. However, the midstream company expects to send even more cash back to investors this year, forecasting an increase of 36% to 38% from the current level. Several factors will drive that high-octane growth in 2019.

However, as good as 2019 will be, the company still has plenty of growth coming down the pipeline so that it can continue sending more cash to its investors in 2020 and beyond.

Check out the latest Antero Midstream earnings call transcript.

Man in a suit and tie reaching out with fanned-out cash in his hand.

Image Source: Getty Images.

Drilling down into Antero Midstream's 2019 plan

Antero Midstream expects to produce between $680 million and $730 million in distributable cash flow (DCF) in 2019, which is money it could send back to shareholders. That's a 17.5% increase at the midpoint from its forecast in 2018. Driving that cash flow growth is the rising volumes flowing through the company's midstream system due in large part to several recently completed expansion projects. For example, the company's joint venture with MPLX (MPLX 0.68%) completed two natural gas processing plants during the fourth quarter and expected to finish its fourth fractionation facility, which separates natural gas liquids (NGLs), by the end of last year. Those expansions will enable Antero Midstream and MPLX to process more natural gas and NGLs for customers, earning higher fees along the way. 

In addition to collecting more income as higher volumes flow through its system, two other factors will provide Antero with the fuel to deliver a big-time dividend increase this year. First, the company is merging with its parent, Antero Midstream GP (NYSE: AMGP), in a deal that will not only simplify their corporate structure but eliminate the costly management fees Antero Midstream paid to Antero Midstream GP. As a result of that move, Antero's dividend will be 37% to 46% higher this year than it would have been on a stand-alone basis.

The other fuel driving Antero Midstream's big dividend increase is that the company intends on paying out a larger portion of its cash flow. Last year, Antero Midstream was on pace to pay out 75% to 80% of its DCF via the dividend, while this year it's on track to send 83% to 90% of its cash flow to shareholders.

A natural gas pipeline at sunset.

Image source: Getty Images.

There's plenty more where that came from

Antero Midstream expects to continue sending more money to investors beyond this year. The company noted that it has about $2 billion of expansion projects lined up through 2022, including several as part of its joint venture with MPLX, that positions it to grow DCF at an 18% to 25% compound annual growth rate from 2020 to 2022.

That has the company projecting strong dividend growth of 29% in 2020 and another 20% in 2021 and 2022. Adding further support to that view is that Antero can fund its planned expansion projects without having to sell any more shares, which would dilute the holdings of existing investors. Instead, it will finance its growth plan with retained cash and incremental debt while maintaining strong credit metrics.

However, it is worth noting that Antero Midstream's longer-term DCF growth forecast is a bit lower than its most recent guidance. That's due to the decline in oil prices, which is leading the company's main customer to reduce its activity level. Though, while cash flow won't increase as much as the company initially anticipated, it's not reducing its dividend growth plan, since it can still generate enough cash to cover its expected increases. Instead, it will pay out a larger percentage of its DCF going forward. While that will require the company to borrow more money to fund expansions, that's not an issue since its increasing cash flow will push its leverage ratio down from slightly more than three times after completing its consolidation transaction with Antero Midstream GP to a mid-2.0 times level by 2022.

A high-octane dividend growth stock for the long haul

Antero Midstream has delivered big-time dividend growth throughout its history, which it expects to continue not only in 2019 but through at least 2022. Add that fast-growing income stream to the company's high-yielding dividend and Antero Midstream has the potential to deliver substantial total returns in the coming years.