ExxonMobil (XOM 0.28%) and Enterprise Products Partners (EPD +0.54%) have two of the best dividend-paying track records in the energy sector. ExxonMobil has increased its dividend for a sector-leading 43 consecutive years. Meanwhile, Enterprise Products Partners has raised its quarterly distribution for 27 years in a row. Both companies currently offer high dividend yields, with Exxon's at 3.5% and Enterprise's at 6.8%, each well above the S&P 500's 1.2% yield.
The elite oil dividend stocks should have plenty of fuel to continue increasing their payouts in the future. They recently enhanced their growth profiles by teaming up on a new expansion project.
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Joining forces to expand a key pipeline
ExxonMobil and Enterprise Products Partners are forming a joint venture to own the Bahia natural gas liquids (NGL) pipeline. Exxon will acquire a 40% interest in the pipeline from Enterprise for $650 million. Enterprise Products Partners is in the process of completing the 550-mile pipeline. It will have the initial capacity to transport 600,000 barrels of NGLs per day from the Permian Basin in West Texas to Enterprise's fractionation complex in Mont Belvieu.
Enterprise and Exxon plan to increase Bahia's capacity to 1 million barrels per day upon closing the transaction, which should occur early next year. They plan to add incremental pumping capacity and build a 92-mile extension to Exxon's Cowboy natural gas processing plant in New Mexico. The "Cowboy Connector" extension will also connect the pipeline to several other gas processing plants owned by Enterprise. The companies expect to complete this project by the fourth quarter of 2027. This project will help support the expected 30% increase in NGL production growth in the Permian Basin by 2030.
NYSE: XOM
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Enhancing its financial and growth profiles
Enterprise Products Partners is currently nearing the end of a multi-year expansion phase that began in 2022. Bahia was one of the last remaining projects the company had under construction. As a result, it's about to enter a new phase of generating significantly more free cash flow.
The master limited partnership (MLP) was on pace to experience a substantial decline in capital spending before it unveiled this new partnership with Exxon. The midstream giant anticipated that its growth capital spending would decrease from $4.5 billion this year to a range of $2.2 billion to $2.5 billion in 2026. Capital spending would likely have been even lower in 2027, considering that the company hadn't yet approved any expansion projects with an in-service date beyond the end of next year.
NYSE: EPD
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The Bahia expansion will slightly alter this outlook by extending the company's growth outlook through the end of 2027. However, this project is unlikely to impact its free cash flow inflection point, as Enterprise will receive a cash infusion from Exxon. As a result, Enterprise Products Partners will have more surplus cash in the coming years to support continued distribution growth (investors should note that the MLP sends a Schedule K-1 Federal Tax Form each year). The company also recently boosted its unit repurchase authorization from $2 billion to $5 billion.
Supporting its growth
ExxonMobil is still very much in growth mode. The energy giant unveiled its plans to 2030 late last year. It expects to deploy around $140 billion into major capital projects and its Permian Basin development program during this period. This capital spending should enable the company to deliver an additional $20 billion in earnings and $30 billion in cash flow by 2030. Its investment in Bahia will enhance its ability to support this growth plan.
The energy company believes it could generate a cumulative $165 billion in surplus cash over this period. It can use that money to make new investments, such as Bahia, while returning more cash to investors. Exxon will undoubtedly continue increasing its dividend over the next five years. It will also likely buy back substantial amounts of its stock. It's targeting to repurchase around $20 billion annually in 2025 and 2026.
Top-tier dividend stocks
ExxonMobil and Enterprise Products Partners are two of the best-run companies in the energy sector. That's evident by their ability to grow their high-yielding payouts despite the sector's volatility. They're further enhancing their ability to grow by forming a partnership to expand Bahia, which should further increase their appeal to income-seeking investors.
