Pipeline companies make ideal long-term investments. Most pipeline operators sell capacity under long-term contracts or government-regulated rate structures, providing them with significant visibility into their future cash flows. Meanwhile, energy demand is growing, which should enable these companies to continue expanding their systems.
Enbridge (ENB +0.80%), Kinder Morgan (KMI +2.10%), and Williams (WMB +0.27%) are three of the best pipeline stocks to buy now. They generate durable cash flows to support their high-yielding dividends. Meanwhile, they have lots of visible growth coming down the pipeline. They could supply investors with a lifetime of steadily rising dividend income.
Image source: Getty Images.
Over 30 years of annual dividend increases
Enbridge is a leading North American energy infrastructure company. The Canadian pipeline and utility operator transports 30% of North America's crude oil and 20% of the natural gas consumed in the U.S. It also operates the largest gas utility franchise and is a leading renewable energy producer.
The company has a low-risk business model as over 90% of its earnings come from regulated rate structures or take-or-pay contracts, providing it with very stable cash flows. Enbridge pays out 60% to 70% of its steady cash flow in dividends (its current yield is 5.6%). That allows it to retain billions of dollars in excess cash flow each year to fund expansion projects.
NYSE: ENB
Key Data Points
Enbridge has an abundance of expansion projects in its backlog. It has commercially secured projects scheduled to enter service through the early part of the next decade. Those projects will grow Enbridge's cash flow by 3% per share this year and by around 5% annually beyond 2026. That should support a similar dividend growth rate. The company has increased its dividend for 31 consecutive years (in Canadian dollars).
Nearing a decade of dividend growth
Kinder Morgan operates the largest U.S. gas transmission network, transporting 40% of the country's production. It also operates refined products pipelines, terminals, and carbon dioxide infrastructure.
NYSE: KMI
Key Data Points
The pipeline company has locked in 70% of its annual cash flows from take-or-pay contracts and hedging agreements. Meanwhile, another 26% comes from steady fee-based contracts. The company pays out less than 50% of its stable cash flow in dividends, retaining the rest to fund expansion projects.
Kinder Morgan currently has $10 billion in commercially secured expansion projects in its backlog, which it expects to complete through 2030. It's pursuing another $10 billion in projects to further enhance and extend its growth visibility. The growing cash flows from these projects should enable Kinder Morgan to continue increasing its high-yielding dividend (3.6% current yield), which it has done for the last nine years in a row.
Over half a century of dividend payments
Williams is a leading gas infrastructure company. It handles a third of the gas produced in the U.S. That puts the company in a strong position to capitalize on the expected 35% surge in gas demand over the next decade.
NYSE: WMB
Key Data Points
The company is currently investing $15.5 billion into growth capital projects that it expects to complete through 2033. In addition to building pipelines and related infrastructure, Williams is investing $7 billion into four gas-fired power innovation projects to support growing electricity demand from data centers and other customers.
These investments fuel Williams' view that it can grow its earnings at a more than 10% annual rate through 2030. That should give the company ample fuel to continue increasing its 2.9%-yielding dividend. Williams has paid dividends for over 50 consecutive years, while growing its payout at a more than 5% compound annual rate since 2020.
Durable dividend stocks
Enbridge, Kinder Morgan, and Williams generate very stable and steadily growing cash flow, fueled by rising energy demand. The upcoming power surge driven by AI data centers and increasing electricity demand should enable these pipeline companies to continue growing their cash flows and dividends for many years to come. That makes them great pipeline stocks to buy and hold for a potential lifetime of passive income.
