Williams Enterprises (WMB 0.26%) offers investors a considerable income stream. The pipeline giant’s dividend currently yields 5.4%. It’s more than three times the S&P500dividend yield of 1.6%. This payout ratio implies that every $1,000 invested in the business can produce $54 in annual passive income.
This annual passive income flux will probably increase in the coming years. This growth is fueled by the continued expansion of the company’s activities pipeline system. Williams recently moved forward with another new expansion project, adding another future fuel source for payment.
Add more fuel to increase the dividend
Williams Companies has steadily increased its dividend in recent years. Since 2018, the natural gas The pipeline giant has been raising it at a compound annual rate of around 6% — including giving its investors a 3.7% raise earlier this year — by investing in $8 billion of expansion projects in high yield. Meanwhile, this payment has become more durable over this period. Williams Companies’ debt ratio has fallen 21% as it generates enough cash flow to cover its dividend by more than twice. This gives it even more financial flexibility to invest in projects that expand its pipeline network, providing it with more fuel to continue to increase its payment in the future.
Williams recently approved its latest expansion project. The company will continue construction of the Louisiana Energy Gateway (LEG) project. LEG will collect 1.8 billion cubic feet of natural gas per day from the Haynesville basin in Louisiana and deliver it to various markets, including its large-scale Transco pipeline, industrial and growth markets. LNG export demand along the Gulf Coast. The company expects this project to come into service and start generating cash flow by the end of 2024.
A unique aspect of LEG is that Williams intends to develop carbon capture and storage infrastructure to decarbonize the natural gas flowing through its pipelines. The company has recently partnered with several technology companies that provide solutions to help verify emissions data, which will help ensure the gas that passes through LEG has a lower carbon footprint, making it more sustainable. .
A growing pipeline of additional revenue streams
The LEG project adds to Williams’ backlog of high-yield expansion projects. The pipeline company has four growth engines that should provide it with steadily increasing revenues in the years to come:
- Transportation Growth Projects: Williams is investing $1.5 billion in six natural gas transmission expansion projects slated to come into service through 2025. The company has more than 30 additional transmission projects in development, representing the potential for investment of 7 billion dollars until 2031.
- Gulf of Mexico Deepwater Expansion Projects: The company has six high-yield capital projects underway to connect new offshore developments to its existing infrastructure. These projects are expected to double its revenue from the region by 2025 with minimal capital investment required.
- Growth of Gathering and Processing (G&P) in the Northeast: Williams has four expansions underway to capture future production growth in the region.
- Hainesville and Wamsutter G&P Growth: Recent partnerships should lead to new expansion opportunities like the LEG project.
Williams is also beginning to expand beyond fossil fuels to drive future growth. The company has formed a new energy business unit to pursue low-carbon investment opportunities. It is investing $100 million in projects this year and sees the potential to invest up to $250 million per year. One area that sees some of this capital investment is solar energy. Williams has 10 solar projects it expects to complete next year and five more in early development. The company has also partnered with European clean energy giant Orsted explore wind energy, hydrogenand other cleaner energy opportunities.
Williams’ growing backlog of secured capital projects should provide the company with steadily increasing cash flow over the next few years. Meanwhile, its development pipeline through natural gas infrastructure and emerging cleaner energy solutions could help fuel long-term growth if it goes ahead with those projects. This should allow the company to continue to increase its dividend payout for years to come.
A Growing Passive Income Pipeline
Williams Companies pays an attractive dividend that has steadily increased over the past few years. This revenue stream is expected to continue to increase in the future, fueled by the company’s growing portfolio of expansion projects like LEG. For this reason, Williams is a great option for those looking to earn passive income.