Matt DiLallo, The Motley Fool
5 min read
In This Article:
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ExxonMobil's investment plan could add $20 billion in earnings and $30 billion in cash flow to its annual total in 2030.
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Kinder Morgan has pipeline projects underway that should enter service through 2030.
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These energy companies should have the fuel to continue growing their high-yielding dividends for at least the next five years.
Investing in high-yielding dividend stocks has benefits and drawbacks. On the plus side, they pay lucrative dividends, making them an excellent way to generate passive income. However, a negative is that many companies have high-yielding dividends because they have nothing better to do with their free cash flow than funnel it back to shareholders.
That's not true with ExxonMobil (NYSE: XOM) or Kinder Morgan (NYSE: KMI). They're also investing heavily in growth projects over the next five years. Because of that, you can confidently buy and hold these energy stocks to collect their high-yielding dividends that should steadily rise through at least 2030.
ExxonMobil is a preeminent dividend stock. The oil giant has increased its dividend payment for 42 straight years. That leads the oil industry and is a record that only 4% of companies in the S&P 500 have achieved.
"And we plan for that track record to continue for decades to come," stated CFO Kathy Mikells on Exxon's fourth-quarter earnings conference call. She noted that continuing to deliver dividend growth is "only possible by investing in the high-quality growth opportunities that drive leading returns and higher cash flows."
The oil giant plans to invest $140 billion into major projects and its Permian Basin development program through 2030. It expects "this capital to generate returns of more than 30% over the life of the investments," stated CEO Darren Woods in the press release unveiling its plan to 2030.
That level of investment and returns has the potential to deliver incremental growth of $20 billion in earnings and $30 billion in cash flow by 2030, assuming oil prices average around $60 a barrel (below the current price point). That's a 10% compound annual growth rate for its earnings and an 8% growth rate for cash flow from last year's baseline.
Exxon estimates that this plan could produce a staggering $165 billion in surplus cash through 2030. The company can use the money to increase shareholder distributions by growing the dividend and continuing to buy back boatloads of its stock. It's aiming to repurchase $20 billion of its shares this year and another $20 billion in 2026, assuming reasonable market conditions.
