Kinder Morgan (KMI +1.83%) has experienced a resurgence in growth over the past year. A projected 20% surge in U.S. gas demand by 2030 is driving an abundance of new expansion opportunities. The gas pipeline company approved another $1.3 billion in expansion projects during the second quarter, adding even more fuel to its growth engine.
Those projects will give the pipeline company even more power to continue increasing its more than 4%-yielding dividend. That makes it an enticing opportunity for those seeking to collect a growing stream of dividend income.
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A growth acceleration
Kinder Morgan's growth engine had spent several years stuck in neutral because of expiring contracts and fewer opportunities for growth projects. During the 2020-2023 period, the company's year-end growth project backlog ranged between $1.4 billion and $3.3 billion.
However, emerging growth catalysts, such as AI data centers and the onshoring of manufacturing, are driving an acceleration in gas demand. That's driving the need for more gas pipeline capacity, providing Kinder Morgan with more opportunities to expand its industry-leading system.
NYSE: KMI
Key Data Points
Kinder Morgan added $1.3 billion of new growth capital projects during the second quarter alone. Notable new project additions included:
- Trident Phase 2: Kinder Morgan secured an additional 500 million cubic feet per day customer commitment, allowing it to increase the capacity on its Trident Intrastate Pipeline from 1.5 billion cubic feet per day (Bcf/d) to 2 Bcf/d. This incremental expansion will raise the cost estimate by $100 million to $1.8 billion. It expects to complete Trident in the first quarter of 2027.
- Texas Access Project: The company approved the $112 million Texas Access Project expansion of the Kinder Morgan Louisiana Pipeline, with a fourth-quarter 2028 in-service date.
- KinderHawk Expansion: Kinder Morgan expects to invest over $500 million to expand its KinderHawk gathering system in the coming years.
- NGPL expansions: The company's NGPL joint venture approved two expansion projects, a $264 million overall investment, that should enter service in 2028.
Those new additions more than replaced the $750 million of projects that entered service in the second quarter. As a result, Kidner Morgan ended the period with a $9.3 billion backlog through 2030. That's up from $8.1 billion at the end of last year and from $3 billion at the end of 2023.
Long-term contracts and government-regulated rate structures back the bulk of those projects. That provides the company with significant visibility into its earnings growth over the next several years.
More growth is likely ahead
Kinder Morgan isn't likely done securing additional expansion projects. Two catalysts fuel that view.
Analysts expect that U.S. liquefied natural gas (LNG) export capacity will more than double by 2030. The company currently has contracts to supply 8 billion Bcf/d of gas to LNG facilities, which will rise to 12 Bcf/d by 2028 as new ones enter service. It's pursuing additional opportunities to supply gas to LNG facilities.
Surging power demand is the other catalyst fueling natural gas demand. AI data centers, the reshoring of manufacturing, and increasing electrification are powering the need for more gas-fired power plants. Approximately half of Kinder Morgan's current backlog is supporting the rising demand for gas from the power sector. The company is actively pursuing more than 5 Bcf/d of additional expansion opportunities to meet the growing demand for gas power.
In addition to organic growth, Kinder Morgan can continue to make accretive acquisitions. It recently bought a natural gas gathering and processing system in the Bakken of North Dakota for $640 million. That deal adds incremental income while reducing its need to spend capital in the region to expand its system in support of its customers' growth, allowing it to reallocate that capital elsewhere. Kinder Morgan has a strong balance sheet, giving it ample flexibility to capitalize on acquisition opportunities as they arise.
Ample fuel to continue increasing its high-yielding dividend
Kinder Morgan continues adding new growth projects to its backlog in support of rising natural gas demand. More project approvals seem likely, driven by the continued uptick in gas demand. These growth projects will provide Kinder Morgan with ample fuel to continue increasing its dividend as they enter commercial service and begin generating cash flow; 2025 was its eighth straight year of dividend growth. It remains a great option for investors seeking a high-yielding and steadily rising stream of passive dividend income.
