I'm on a mission to eventually generate enough dividend income to cover my expenses. While I've got a lot of ground to cover, I'm making progress on my goal each month.

My core investment strategy is to invest in companies that pay higher-yielding dividends that they can steadily increase. I've found that many pipeline stocks deliver on both objectives. Three of my favorite passive income-producing pipeline companies are Energy Transfer (ET 0.55%)Enbridge (ENB 0.74%), and Kinder Morgan (KMI 2.09%). I can't wait to buy more of each this month to continue growing my future dividend income.

Clarity on the future of the payout

Energy Transfer currently offers a big-time income stream. The master limited partnership's (MLP) distribution yields an eye-popping 9.7%. While payouts that high are often a warning sign that a cut might be forthcoming, Energy Transfer expects its payout to continue rising.

The midstream giant had spent the past couple of years getting its financial house in order. During the pandemic, it slashed its distribution by 50% to conserve cash and reduce leverage. That allowed it to get its leverage ratio down to its 4.0-4.5 target range. As leverage improved, the MLP steadily increased its distribution until it reached its goal of returning the payout to the pre-pandemic level.   

With that aim now achieved, Energy Transfer has set a new one. It plans to increase its payout by 3% to 5% per year. It can easily afford to do that. The MLP currently generates enough cash to cover its distribution payment and growth capital plan (roughly $2 billion in 2023) with room to spare. The company's growth-related investments (including its recent acquisition of Lotus Midstream) should increase its cash flow in the future. As a result, this big-time payout seems likely to keep rising. 

The steady growth should continue

Enbridge has a phenomenal track record of paying dividends. The Canadian energy infrastructure behemoth has increased its payout for 28 straight years. That growth streak won't end anytime soon.

Powering that view is the company's large and growing expansion project backlog. Enbridge revealed at its investor day in March that it has 17 billion Canadian dollars ($12.5 billion) of expansion projects under construction. Meanwhile, it has many more projects under development. They drive the company's view that its distributable cash flow will rise by around 5% per share over the medium term. That should support dividend growth up to that level. 

The company has ample financial capacity to fund its 6.9%-yielding dividend and those expansion projects. Enbridge has a reasonable dividend payout ratio of around 65% of its distributable cash flow. That allows it to retain billions of dollars each year to finance expansion. Meanwhile, Enbridge has a strong investment-grade balance sheet, providing additional financial flexibility.

A rock-solid payout

Kinder Morgan currently pays a 6.8%-yielding dividend. The natural gas pipeline giant has increased its payout for six straight years, including giving investors a 2% raise in 2023. 

Kinder Morgan has plenty of fuel to maintain and grow that dividend. It has a very conservative dividend payout ratio of around 50% of its distributable cash flow. That allows it to retain cash to fund expansion projects and maintain a strong balance sheet. Kinder Morgan currently expects to end the year with a leverage ratio of 4, well below its 4.5 target. These features put its dividend on a very firm foundation. 

They also give Kinder Morgan tremendous financial flexibility to make accretive investments. It's investing about $3.3 billion into capital projects ($2.1 billion of which it will fund this year) that should grow its cash flow in the future. Meanwhile, it has ample financial capacity to sanction additional expansion projects, make acquisitions as opportunities arise, and repurchase shares. These drivers should give it the fuel to continue growing its dividend in the future.

High-quality dividend stocks

Energy Transfer, Enbridge, and Kinder Morgan all pay above-average dividends that should continue growing. As a result, they're ideal fits for my income-growth investment approach. That's why I'm excited to add to my position in each one this May.