Kinder Morgan (KMI +0.11%) generates a substantial amount of stable cash flow, with regulated rate structures, long-term contracts, and hedging agreements supporting around 95% of its earnings. It also has a long list of expansion projects underway. That gives the natural gas pipeline company tremendous visibility. It expects to produce more cash in the coming year, driving its confidence that it can continue increasing its 4.3%-yielding dividend in 2026.
Here's a look at what the pipeline stock sees ahead.
Image source: Getty Images.
Drilling down into Kinder Morgan's 2026 outlook
Kinder Morgan recently provided its financial expectations for the coming year. The natural gas infrastructure giant anticipates producing $8.7 billion of adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA). That's about 4% more than it expects to produce this year. Meanwhile, the company sees its adjusted earnings rising by 8% to $1.37 per share.
The gas pipeline company will get a lift from several project completions. The company placed $500 million of expansion projects into commercial service during the third quarter of this year, including the $263 million Altamont Green River Pipeline project, which will help fuel growth over the next year. Meanwhile, it's on track to complete the Cumberland ($200 million estimated cost) and Hilland Express ($100 million) projects in the first quarter of next year, followed by the GCX expansion ($200 million) in the second quarter and the Plantation North Expansion ($500 million) by the end of the year.
NYSE: KMI
Key Data Points
This earnings growth gives Kinder Morgan the confidence that it can pay $1.19 per share in dividends next year. That's a roughly 2% increase from this year's level, and would mark its 9th straight year of raising the dividend.
The company also anticipates ending next year with a 3.8 times leverage ratio. That's down from 3.9 times at the end of the third quarter and in the low end of its 3.5-4.5 times target range. This conservative level will provide the company with ample flexibility to opportunistically pursue new investments next year.
More growth coming down the pipeline
Kinder Morgan expects to invest $3.4 billion into organic expansion projects in 2026. That's $400 million more than this year's level. This increase in capital spending will help complete its 2026 slate of capital projects and fund those with in-service dates farther out in the future.
The company ended the third quarter with $9.3 billion of organic capital projects in its backlog. That's over three times the size of its backlog at the end of 2023. Most of those projects ($8.4 billion) are related to natural gas infrastructure.
The bulk of its backlog will enter service in the 2027 to 2029 time frame. It has three large-scale gas pipeline projects underway (Trident, Mississippi Crossing, and South System Expansion 4). That trio of gas pipeline projects will all cost between $1.7 billion and $1.8 billion to complete. Meanwhile, given the size and timeline of the Plantation North Expansion, it will be a more significant growth driver in 2027. The company also has one project with a 2030 in-service date, the $400 million Bridge project that it expects to complete in the second quarter of that year.
As a result, the company's earnings growth rate should accelerate in 2027 as Plantation North and the first phase of Trident provide it with incremental earnings. This elevated growth rate should continue through 2030.
The company is working to enhance its already robust growth outlook. It recently proposed building the Western Gateway Pipeline in partnership with Phillips 66. The pipeline system would transport refined products from Texas toward markets in the West and could enter service by 2029. Additionally, Kinder Morgan is pursuing upwards of $10 billion in new gas-related infrastructure projects to support the growing demand for cleaner-burning fuel from data centers and power companies. Meanwhile, Kinder Morgan has ample financial capacity to make acquisitions as opportunities arise. For example, it closed its $640 million acquisition of a natural gas gathering and processing system earlier this year.
A well-oiled, dividend-paying machine
Kinder Morgan's energy infrastructure assets generate lots of stable cash flow. That gives it the funds to invest in growing its business, while also allowing it to pay a super-safe, high-yielding, and steadily rising dividend. The company expects to continue growing in 2026 before hitting the gas in 2027 as its larger-scale projects begin entering commercial service. This combination of income and growth could enable Kinder Morgan to produce high-octane total returns in the coming years, making it an attractive energy stock to buy and hold.
