The insatiable energy and data transmission demands of the artificial intelligence boom are creating unprecedented growth runways for two unexpected dividend champions: energy infrastructure giant Kinder Morgan and cell tower REIT American Tower. These established companies offer investors exposure to AI’s transformative power without the volatility of pure tech plays, alongside attractive and growing dividends.
The artificial intelligence (AI) revolution is reshaping industries globally, but its ripple effects extend far beyond the headline-grabbing chipmakers and software developers. Beneath the surface, the foundational infrastructure powering AI’s immense computational and data demands is experiencing an unprecedented boom. For long-term investors, this presents a unique opportunity in high-yielding dividend stocks that are less susceptible to the speculative swings of pure growth plays.
Among the companies poised to benefit significantly are Kinder Morgan (NYSE: KMI), a natural gas pipeline giant, and American Tower (NYSE: AMT), a leading real estate investment trust (REIT) focused on communication infrastructure. Both are finding their established business models reinvigorated by the massive resource requirements of the AI era, translating into accelerating earnings and reliable, growing dividends for shareholders.
Kinder Morgan: Fueling AI’s Energy Hunger
For years, Kinder Morgan faced stagnant growth, with its earnings largely flat and a modest expansion project backlog. However, the landscape has dramatically shifted. Driven by surging natural gas demand, particularly from energy-intensive AI data centers, Kinder Morgan’s expansion project backlog has soared from $1.4 billion at the end of 2021 to an impressive $9.3 billion, as reported by The Motley Fool.
This resurgence is clearly reflected in its recent financial performance. The company reported strong third-quarter results, with adjusted EBITDA increasing by 6% year-over-year and adjusted earnings per share (EPS) jumping by 16%. This marks a notable acceleration compared to previous years. The primary driver of this growth was its gas pipelines business, which saw earnings rise 10%, fueled by increased contributions from its Texas Interstate system and Tennessee Gas Pipeline, as well as higher volumes from liquefied natural gas (LNG) terminals and new expansion projects.
A Decade of Growth Ahead
Kinder Morgan’s gas pipeline business is set to be a long-term growth engine. The company’s $9.3 billion backlog includes major projects like Trident ($1.8 billion), South System Expansion 4 ($1.8 billion), and Mississippi Crossing ($1.7 billion), with commercial service expected through the second quarter of 2030. These projects are strategically positioned to support the increasing demand from LNG terminals and power plants that supply electricity to AI data centers and new manufacturing facilities.
CEO Kim Dang noted in a recent earnings press release that the company is “seeing an opportunity set more robust than at any time in the company’s history.” The company anticipates delivering 12 billion cubic feet per day (Bcf/d) of gas to LNG terminals by 2028, a significant increase from 8 Bcf/d today. Furthermore, Kinder Morgan is actively exploring over 10 Bcf/d of opportunities to supply gas to the U.S. power sector, estimating that it could approve more than $10 billion in additional gas projects in the coming years, as highlighted by The Motley Fool.
Beyond natural gas, Kinder Morgan is also diversifying its growth. A potential partnership with Phillips 66 for the Western Gateway Pipeline, designed to ship refined products from Texas to Arizona and California, could further enhance its long-term outlook, with a commercial service target of 2029.
American Tower: The Digital Backbone of AI
While Kinder Morgan provides the energy, American Tower (NYSE: AMT) offers the crucial data transmission infrastructure for the AI revolution. As a leading REIT with approximately 224,000 towers worldwide and 28 data centers primarily in U.S. metro areas, American Tower is uniquely positioned to capitalize on the escalating demand for data. More advanced digital applications, including AI, inherently require greater data transmission capabilities.
As a REIT, American Tower distributes at least 90% of its income to shareholders, offering an attractive dividend yield of around 3.9% at recent prices. The company boasts an impressive track record of dividend growth, increasing its payout every three months since early 2012 (excluding Q1 2023). Over the past five years, the payout has risen by 93%, and a staggering 458% over the past decade, according to The Motley Fool.
Navigating Economic Headwinds for Long-Term Gain
The current macroeconomic environment, particularly rising interest rates since March 2022, has impacted American Tower’s adjusted Funds From Operations (FFO). A proxy for earnings in REITs, FFO is expected to see a slight contraction of 0.6% in 2023 compared to 2022. However, this is largely viewed as a temporary setback due to higher interest expenses taking time to manifest on the bottom line. Despite this, tenant billings are projected to rise by 6.5% year-over-year, indicating robust underlying demand.
With demand for data centers and towers remaining strong and potential easing of interest rate hikes, American Tower’s FFO is anticipated to return to growth in 2024. The long-term trajectory for this company is exceptionally promising, as the “seemingly endless demand for more data transmission related to AI applications, or whatever trend comes next, will most likely help American Tower’s bottom line start climbing rapidly again,” as noted by The Motley Fool.
The Smart Money’s AI Play
For investors seeking exposure to the AI revolution without the inherent volatility of many technology stocks, Kinder Morgan and American Tower present compelling opportunities. Both companies represent essential infrastructure plays that directly benefit from AI’s insatiable demands for energy and data transmission.
Kinder Morgan’s accelerating earnings growth, fueled by its significant project backlog and potential for over $10 billion in new gas projects, provides strong support for its 4.3%-yielding dividend. The company has a consistent track record of increasing its dividend, now for eight straight years. Similarly, American Tower’s foundational role in global data transmission, coupled with its reliable and rapidly growing 3.9% dividend yield, positions it as a resilient long-term investment.
These companies offer a potent combination of income and growth, making them attractive options for patient investors looking to capitalize on the AI boom through established, financially sound businesses rather than speculative ventures. The long-term trends underscore that AI’s growth is not just about chips and software; it’s profoundly about the physical infrastructure that makes it all possible.
