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.
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A bold plan to 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.
Given Exxon’s track record and visible earnings growth through 2030, it seems safe to assume it can continue growing its dividend, which yields nearly 4%, throughout this period.
A growing growth pipeline
Kinder Morgan extended its dividend growth streak to eight straight years in 2025. The pipeline company’s payout, which yields over 4%, should continue growing for at least the next five years.
Several factors drive that view. For starters, the company has highly contracted and predictable cash flows. Only 5% of its cash flow is exposed to commodity prices, and another 26% is subject to volume risk. Take-or-pay agreements or hedging contracts that guarantee payment lock in 69% of its cash flow.
Kinder Morgan pays out less than half of its stable cash flow in dividends. It retains the rest to invest in expansion projects and maintain its financial flexibility.
The company currently has $8.8 billion of commercially secured expansion projects underway. That’s a $5.8 billion increase from where its backlog was at the end of 2023. Its current slate of projects includes $8 billion of natural gas-related expansions. Those projects have in-service dates through the second quarter of 2030. Because of that, they’ll supply the company with steadily growing cash flow through at least the end of that year.
Kinder Morgan plans to continue adding fuel to its growth engine. It recently closed the $640 million acquisition of a natural gas gathering and processing system in the Williston Basin area of North Dakota, which will immediately boost its cash flow. The company has ample financial flexibility to complete additional accretive deals as opportunities arise in the future.
Kinder Morgan is also pursuing a slew of additional growth projects. It’s currently working on a substantial number of opportunities to supply additional gas to liquefied natural gas (LNG) export terminals that are under development. The company is also pursuing opportunities to supply a lot more gas to the power sector, which is expected to require substantial additional fuel in the future to support the anticipated surge in electricity demand from catalysts such as AI data centers.
With visible growth coming down the pipeline and more opportunities on the horizon, Kinder Morgan should have ample fuel to continue increasing its high-yielding dividend through at least 2030.
Growth visibility for the next five years
Most companies don’t have a lot of growth visibility. That’s what makes ExxonMobil and Kinder Morgan stand out. They currently have visibility into their ability to grow their earnings and cash flow through 2030. Because of that, it looks highly likely that they will be able to increase their high-yielding dividends throughout that time frame. That’s why you can confidently buy and hold these dividend stocks for the next five years, if not much longer.
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Matt DiLallo has positions in Kinder Morgan. The Motley Fool has positions in and recommends Kinder Morgan. The Motley Fool has a disclosure policy.
