Kinder Morgan (NYSE: KMI) and Williams (NYSE: WMB) are two of the largest natural gas pipeline companies in the country. Their extensive infrastructure generates very stable cash flow, enabling the companies to pay high-yielding dividends — recently 4.3% for Kinder Morgan and 3.5% for Williams — and invest in expanding their pipeline networks. Those growth projects give them the fuel to increase their dividends.
Most investors likely will only want to own one of these high-yielding pipeline stocks in their portfolio. Here’s a look at the best one to buy right now for dividend income.
Many investors will take one look at the dividend yields currently offered by Kinder Morgan and Williams and automatically assume that Kinder Morgan’s higher-yielding payout makes it the better option. However, it’s more important to ensure that any high-yielding dividend is sustainable. With that in mind, here’s a closer look at their financial profiles:
|
Pipeline Stock |
Dividend Payout Ratio (2024 Cash Flow From Operations) |
Leverage Ratio |
2025 Adjusted EBITDA Growth Rate |
|---|---|---|---|
|
Kinder Morgan |
45% |
4.0 |
4% |
|
Williams |
47% |
3.8 |
3.4% |
Data sources: Kinder Morgan and Williams.
As that table shows, the pipeline companies have very similar financial profiles. While Williams has a lower leverage ratio, Kinder Morgan’s is trending toward the lower half of its 3.5-to-4.5 target range. It currently expects to end 2025 with a 3.8 leverage ratio. Meanwhile, they have the same bond ratings of BBB/Baa2.
The two pipeline companies also have similarly stable cash flow profiles, with the bulk of their earnings backed by long-term, fee-based contracts and government-regulated rate structures. They both produce enough stable cash to cover their dividends and capital spending with room to spare. Williams generated nearly $100 million in excess free cash flow after capital spending and dividends last year, while Kinder Morgan produced about $450 million.
The big difference in dividend yield comes down to valuation. Williams reported $1.92 per share of adjusted earnings last year. With its stock price recently right around $57, it trades at nearly 30 times earnings. Meanwhile, Kinder Morgan’s adjusted earnings were $1.15 per share. With its share price around $26.50, it trades at 23 times earnings.
Another factor to consider is their ability to increase their high-yielding dividends. Williams has grown its dividend at a 5% compound annual rate over the past five years, including by 5.3% for 2025. This year will mark Kinder Morgan’s eighth straight year of dividend growth. However, it has been increasing its payment at a more modest 2% annual rate in recent years.