Natural gas pipeline giant Kinder Morgan (KMI 0.43%) has long held an optimistic view on the future of natural gas demand. The company believes that liquified natural gas (LNG) exports will drive significant demand growth in the coming years. On top of that, artificial intellgence data centers could become a significant incremental demand driver.
While recent developments have caused concerns about whether those demand forecasts are too optimistic (i.e., Deepseek and tariffs), Kinder Morgan is still very bullish on natural gas. That's because new demand drivers continue to emerge. The latest is that the Trump administration has unveiled nearly $7 trillion in new investments since taking over this year, which could drive additional gas demand if they come to fruition. These catalysts drive the company's view that it has lots of growth ahead, which bodes well for its ability to continue increasing its 4.5%-yielding dividend.
NYSE: KMI
Key Data Points
The $7 trillion investment spree
One of the key goals of the Trump administration is to turn the U.S. into an economic powerhouse. The president wants to increase investment in the country by breaking down trade barriers, through tariffs and other means, and reducing regulation.
The administration's policy changes have already attracted a flood of new investment pledges. Earlier this month, the president told reporters:
We have, I would say, more than $7 trillion now... of investments coming in. Apple is coming in for $500 billion alone. We have other companies coming in with massive numbers.
The tech giant, for example, expects to invest that money over the next four years into expanding its facilities across several states, building a new facility in Texas, and other investments, like data centers.
Another notable investment includes the project Stargate, a massive $500 billion AI data center development by Softbank, OpenAI, and Oracle. Meanwhile, semiconductor companies Taiwan Semiconductor and Nvidia have committed to investing $100 billion and $200 billion, respectively. In addition, several countries have committed to investing significant amounts of capital into the U.S., including $1.4 trillion from the UAE, $1 trillion from Japan, and $600 billion from Saudi Arabia.
Fueling the investment spree
Many of those investments will see companies build physical data centers or manufacturing complexes. These facilities will need energy, which is something the U.S. has in abundance, thanks to its treasure trove of low-cost natural gas resources.
Kinder Morgan believes these investments would only add to the already significant growth expected for U.S. natural gas demand. CEO Kim Dang stated on the company's first-quarter conference call that "even if a portion of the roughly $7 trillion in new U.S. investment the administration has announced occurs, we believe that would drive demand that is not currently captured in the projection."
Those projects would probably give the company even more opportunities to invest in expanding its natural gas infrastructure. It already has $8.8 billion of projects in its backlog, 91% of which will support natural gas. That's $900 million more than at the end of last year, as it recently added several new projects to its backlog. The biggest new addition is a $430 million extension of its Elba Express pipeline. That project will deliver about 325 million cubic feet of natural gas per day (Bcf/d) to South Carolina when it enters commercial service in 2030. The company could expand that capacity to 1 billion cubic feet per day in the future, depending on demand. Kinder Morgan now has visible earnings growth through the early part of the next decade.
The company expects its backlog to continue growing as utilities and other gas consumers have more visibility into their future gas requirements. In Kinder Morgan's earnings press release, Dang stated, "In the natural gas power generation sector, we are actively pursuing well over 5 Bcf/d of opportunities to serve that market." She noted that the company is in a strong strategic position to capture a meaningful share of this demand due to its 66,000-mile pipeline network and 700 billion cubic feet of storage capacity.
Lots of growth is coming down the pipeline
Kinder Morgan believes natural gas demand will continue growing at a solid clip for many years to come, fueled by catalysts like LNG and AI data centers. Meanwhile, with an estimated $7 trillion of investment pledges pouring in since the new administration took over in January, gas demand could grow even faster in the future. That bodes well for Kinder Morgan because it should provide the company with even more opportunities to expand its extensive gas infrastructure, giving it more fuel to continue growing its high-yielding dividend. That income and growth combo makes it look like a great stock to buy and hold for the long term.
