Williams Companies (WMB +1.70%) has everything a retiree could want in a dividend stock. Not only does it pay a high yield -- it's currently up to 6.5% -- but it also offers attractive growth prospects. That has been evident in the energy company's financial results so far this year, as earnings were up nearly 9% year over year through the second quarter, while cash flow had spiked 21%. That fast-paced growth has enabled the company to increase its dividend 11.8% over the past year.
The pipeline giant could have even more good news for its retirement-focused investors when it unveils its third-quarter results later this week. Here's what it could say that would give investors reason to cheer.
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Delivering results that have it on track for a high-end finish
Through the second quarter, Williams Companies generated $2.46 billion of adjusted EBITDA and $1.65 billion of distributable cash flow (DCF). That kept the company on track with its full-year forecast, which would see it produce between $4.85 billion and $5.15 billion of adjusted EBITDA and $2.9 billion-$3.3 billion of DCF.
Ideally, Williams Companies will deliver strong results in the third quarter, which would put it on pace for the high-end of its forecast range. That's what happened last year as both adjusted EBITDA and DCF came in near the top end of its guidance.
On the one hand, it will be tough for the company to deliver high-end results this year due to recent asset sales. Williams not only formed a joint venture to operate some of its natural gas gathering assets in the northeast but also sold its interest in another JV in the Powder River Basin to help bolster its balance sheet. However, CEO Alan Armstrong noted in the second-quarter earnings release that thanks to low natural gas prices, "demand for low-cost power generation, LNG exports, and new industrial loads will grow even faster in the second half of the year." That should fuel higher volumes across the company's footprint. If that thesis played out during the third quarter, then Williams could report that it's on track for a high-end finish, which would be great news for investors.
Enhancing its long-term growth visibility
Williams sees adjusted EBITDA rising between 4.5% to 11% year over year in 2019, or about 8% at the midpoint of its guidance range. The company, however, expects its growth rate to begin moderating next year to an annual range of 5%-7%.
The company's ability to grow earnings toward the top end of that forecast hinges on its ability to secure new expansion projects. It has several in development, including new gas processing plants in the DJ Basin and pipeline expansions in the Gulf of Mexico. It could have some good news on that front this week if it announces that it secured a few more new projects. That would increase the probability that the company grows toward the high-end of its range in the coming years. It would also give the company more fuel to increase its dividend after this year.
Hoping for more good news
Williams Companies has done an excellent job growing its earnings in recent years while also shoring up its balance sheet. It has done that by investing in high-return projects that expand its natural gas pipeline operations. Ideally, the company will have maintained its momentum during the third quarter by not only generating high-end results but also securing more expansions to fuel future growth. That would enhance the company's ability to enrich retirees in the coming years.
