This 4%-Yielding Dividend Stock Adds Another $1.3 Billion of Fuel to Its Growth Engine

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Over the past year, Kinder Morgan (KMI) has seen a renewed surge in growth. Anticipated U.S. gas demand growth by approximately 20% before 2030 has opened up numerous new expansion possibilities. In fact, the pipeline company recently greenlit another $1.3 billion worth of expansion projects during Q2, further stoking its engine of growth.

The ongoing projects will enhance the pipeline firm’s capacity to keep boosting its already substantial dividend, which yields over 4%. This appealing aspect makes it an alluring prospect for individuals who aim to accumulate a continually expanding source of dividend earnings.

A growth acceleration

Kinder Morgan’s expansion strategy remained idle for several years due to expiring contracts and limited prospects for new growth initiatives. Between 2020 and 2023, the company’s pending growth projects varied from approximately $1.4 billion to $3.3 billion at year-end.

Nevertheless, new growth stimulators like AI data facilities and reshoring of manufacturing are propelling a rapid increase in gas consumption. This surge in demand necessitates an enhancement in gas pipeline capacity, thereby offering Kinder Morgan additional chances to broaden its leading network in the industry.

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During the second quarter, Kinder Morgan invested approximately $1.3 billion in new expansion projects. Some notable additions to these projects were made as well.

  • 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.

The recently introduced projects valued over $750 million have surpassed those that became operational in Q2. Consequently, Kinde Morgan concluded the quarter with a projected workload of $9.3 billion, scheduled to be completed by 2030. This figure is higher than the $8.1 billion at the end of last year and notably greater than the $3 billion at the end of 2023.

Most of these projects are supported primarily by long-term agreements and government-imposed pricing structures. This gives the company a good understanding of its potential revenue expansion for the coming years.

More growth is likely ahead

It is unlikely that Kinder Morgan has completed securing further expansion projects, as two factors support this perspective.

Analysts predict that the United States’ capacity for exporting liquefied natural gas (LNG) will significantly increase, nearly doubling by 2030. At present, the company has agreements in place to deliver approximately 8 billion cubic feet per day (Bcf/d) of gas to LNG plants, a figure that is projected to reach 12 Bcf/d by 2028 as new facilities come online. The company is actively seeking more chances to provide gas to LNG facilities.

Increased energy requirements, driven by factors such as AI data centers, reshoring of manufacturing, and widespread electrification, are stimulating a higher demand for natural gas. This increased demand is leading to an expansion in the construction of gas-fired power plants. At present, Kinder Morgan is committed to addressing around 5 billion cubic feet per day of additional demand from the power sector by actively seeking more opportunities for growth in this area.

Alongside natural expansion, Kinder Morgan can also pursue acquisitions that boost profits. They recently acquired a natural gas collection and processing system in North Dakota’s Bakken region for $640 million. This purchase increases their income without requiring additional capital investment in the region to expand their system, as it supports the growth of their customers. This frees up capital to be used elsewhere. With a robust financial standing, Kinder Morgan has the ability to seize acquisition opportunities whenever they arise.

Ample fuel to continue increasing its high-yielding dividend

Kinder Morgan consistently expands its list of new development projects, responding to the increasing demand for natural gas. With gas consumption on the rise, it’s expected that more projects will receive approval. These growth initiatives offer Kinder Morgan the resources to keep boosting its dividend once they become operational and start generating revenue; 2025 marked its eighth consecutive year of dividend growth. It remains a strong choice for investors seeking a high-yielding, consistently growing source of passive dividend income.

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2025-07-22 10:20