Williams Companies (NYSE:WMB) and its MLP Williams Partners (NYSE:WPZ), fresh off its recently completed merger with Access Midstream Partners, just reported very good results. Find out just how good a quarter it was and what management's revised guidance means for long-term dividend investors. 

The results
Williams Companies reported a 16% increase in payments from its two MLPs, totaling $515 million. This performance translated to an adjusted segment profit plus DD&A -- that's depreciation and amortization, which is how the company prefers to report profits -- of $944 million, a 30% increase over last year's quarter. 

For the full year, Williams' results were similarly impressive. Cash distributions from its MLPs were up 29% to $2 billion, and adjusted segment profit plus DD&A increased 23% to $3.32 billion. The rapid growth Williams enjoyed in 2014 was largely courtesy of Access Midstream, which contributed $386 million in adjusted segment profit-plus-DD&A growth but was dragged down by Williams Partners' $170 million decrease in the same metric. 

Overall, Williams Companies was able to beat Wall Street's earnings expectations by 13% this quarter, reporting $0.26 per share in net income, compared with the $0.23 per share analysts were expecting. For the full year, Williams' earnings soared 371% to $2.92 per share, compared with 2013's $0.62 per share. However, the $1.678 billion increase in net income was due to a onetime $2.5 billion non-cash pre-tax gain that resulted from a revaluation of Williams' ownership of Access Midstream's assets after it announced the merger. Backing out that gain, its net income from continuing operations was $0.80 per share, missing Wall Street expectations by $0.03 per share for the full year. 

However, given that we're interested in Williams Companies and Williams Partners -- whose name and ticker the merged MLP will use -- as long-term income investments, I think investors should usually ignore quarterly earnings results. Instead, look toward the future and what management's revised guidance says about Williams Companies and Williams Partners' future dividend and distribution growth prospects. 

Revised guidance shows strong growth ahead
For 2015, management expects the newly merged Williams Partners to report distributable cash flow, or DCF, growth of 16.8%, much better than 2014's 6.9% growth, which took a hit after the Geismar Elfin plant went out of commission because of a fire. The plant has been repaired and went back online this month, and production is being ramped up through March. 

Williams Partners is expected to see strong growth in DCF in 2016 and 2017 of 22.1% and 13.9%, respectively. Similarly, adjusted EBITDA, or earnings before interest, taxes, depreciation, and amortization, are expected to grow by 33.6% between 2015 and 2017.

Source: Williams Companies fourth-quarter earnings release.

That's both courtesy of Access Midstream's access to rapidly growing gas-producing regions such as the Marcellus and Utica Shales, and also the $9.3 billion in investment growth capital the company plans to invest over the next three years. According to CEO Alan Armstrong, 99% of that figure will go toward "fully contracted, fee-based projects."

This focus on long-term, inflation-adjusted contracts will help Williams derive 88% of its 2015 gross margin from fee-based contracts, a figure that's likely grow in the years to come. 

That's important, because long-term fee based contracts help smooth out and ensure predictable cash flows -- a vital necessity for any primarily income-focused investment.  

What to watch for going forward
Perhaps the only negative in terms of the earnings report and revised guidance was in management's revealing that lower energy prices could threaten its previous dividend and distribution guidance of 15%, and 10%-12%, respectively. Because of plunging oil and gas prices, management has revised those figures down to 10%-15% and 7%-11%, respectively. 

In addition, because it's now anticipating average annual oil and natural gas prices of between $55 and $70 per barrel and $3 and $3.75 per thousand cubic feet over the next three years, the long-term distribution coverage ratio is now expected to be 1.07 -- in 2017 -- as opposed to the 1.1 guided for previously. While this still indicates a healthy and sustainable distribution, Williams Partners has, in the past, fallen short of its distribution coverage targets, and I would recommend that current and potential investors keep a close eye on this important metric. That is especially true given that natural gas prices have crashed by about 40% since late November and are currently trading 13% below management's average 2015 projected price.

Henry Hub Natural Gas Spot Price Chart
Henry Hub Natural Gas Spot Price data by YCharts

Takeaway: Strong growth prospects through 2017 potentially clouded by weak commodity prices and slower payout growth
Despite large obstacles in 2014, such as the shutdown of the Geismar plant because of fire damage, and plunging energy prices, Williams Companies and Williams Partners had a pretty solid year in terms of DCF and adjusted segment profit growth. Over the next three years, management has a plan to continue growing its natural gas and natural gas liquid transportation empire and rewarding long-term investors with some of the strongest payout growth in the midstream MLP industry. However, investors need to be aware that future payout growth may be slower than previously forecast and use this new guidance to allocate their diversified income portfolios accordingly.