OXY

Occidental Petroleum Corporation

58.88
USD
2.36%
58.88
USD
2.36%
21.62 74.04
52 weeks
52 weeks

Mkt Cap 53.71B

Shares Out 933.74M

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These High-Yield Stocks Are Teaming Up to Add More Fuel to Grow Their Dividends

Russia's invasion of Ukraine has dramatically altered the energy landscape. It's driving up oil and gas prices, forcing countries to prioritize energy security. These factors are giving energy companies in the U.S. the confidence to start growing their production. But they'll need more infrastructure to support higher output in the future. Pipeline companies are starting to benefit from this shift. They're able to secure enough customers to support new infrastructure projects. EnLink Midstream (NYSE: ENLC) and MPLX (NYSE: MPLX) were recent beneficiaries of these improving market conditions, and they could now have more fuel to grow their high-yield dividends in the future. Hitting the gas EnLink and MPLX are partnering with oil and gas producer Devon Energy (NYSE: DVN) and privately held infrastructure company WhiteWater on the Matterhorn Express Pipeline. The 490-mile pipeline will be able to transport 2.5 billion cubic feet per day (Bcf/d) of natural gas sourced from the prolific Permian Basin to Houston, Texas. It will receive gas from multiple places in the Permian, including a direct connection to processing plants in the region through a 75-mile lateral and the 3.2 Bcf/d Agua Blanca Pipeline operated by WhiteWater and MPLX. The pipeline will support producers like Devon Energy as they increase their production in the Permian in the coming years. The partners secured enough customers to make a positive investment decision on the pipeline, which they expect to finish by the third quarter of 2024, assuming regulatory and other approvals. The Matterhorn Express Pipeline will produce predictable cash flow when it enters service, secured by those firm transportation agreements with customers. That will give midstream companies EnLink and MPLX more cash flow to support their dividends, which yield 4.5% and 9.3%, respectively. It will also supply Devon Energy with steady cash flow to fund its attractive payout, which yields around 8% when adding its variable dividend. Adding to their growth drivers MPLX already has several expansion projects under construction and in development. It expects to finish construction on two processing plants this year. Meanwhile, it recently reached a final investment decision to expand its Whistler Pipeline. The company and its partners, which includes WhiteWater, received enough firm transportation agreements with shippers to move forward with an expansion from 2 Bcf/d to 2.5 Bcf/d, which they expect will be in service by September of 2023. It's also looking to expand its oil pipelines. MLPX's cash flow should keep growing for the next few years when adding Matterhorn to the mix. Given its strong financial profile, the master limited partnership (MLP) should be able to continue returning more cash to shareholders. MPLX already raised its high-yielding distribution by 2.5% last year to go along with a sizable special distribution and repurchase program. Meanwhile, EnLink's cash flow is rising thanks to higher commodity prices, which are driving increased volumes across its legacy systems. Those improving market conditions are also providing EnLink with new expansion opportunities in addition to Matterhorn. The company increased its capital spending range from $230 million-$$260 million up to $280 million-$310 million, which should drive growth in the near term. It's also working on some longer-term opportunities. It signed a letter of intent with Occidental Petroleum (NYSE: OXY) subsidiary Oxy Low Carbon Ventures to provide it with carbon dioxide transportation services. The potential project would utilize new and existing pipelines operated by EnLink to move carbon dioxide captured by Occidental to a sequestration hub it's developing. Projects like these will provide EnLink with more cash flow to return to shareholders. In addition to paying an attractive dividend, EnLink is buying back its stock. Meanwhile, with its cash flow expected to continue rising while its share count is falling, EnLink should be able to grow its dividends on a per-share basis in the coming years. More income ahead EnLink and MPLX already offer investors attractive income streams. However, with conditions in the energy market improving, they should produce even more cash flow in the future, especially as they complete new expansion projects like Matterhorn. That should give these pipeline companies the fuel to pay even more generous dividends in the coming years. 10 stocks we like better than EnLink Midstream When our award-winning analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.* They just revealed what they believe are the ten best stocks for investors to buy right now... and EnLink Midstream wasn't one of them! That's right -- they think these 10 stocks are even better buys. *Stock Advisor returns as of April 27, 2022 Matthew DiLallo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

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