Kinder Morgan (KMI -0.26%) recently revealed its financial expectations for the upcoming year. The natural gas pipeline giant foresees its earnings continuing to rise, which will give it the fuel to increase its dividend once again. That payout -- which already yields more than 4% -- will be on a rock-solid foundation in the coming year.
Here's a closer look at what Kinder Morgan sees ahead in 2025.
The steady growth continues
Kinder Morgan expects to generate $8.3 billion of adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) next year. That implies a 4% increase from its forecast of $8 billion for 2024 (about 5% higher than 2023's level). Meanwhile, the company expects its adjusted earnings to grow even faster, rising 8% to $1.27 per share (after increasing by 9% this year to $1.17 per share).
The natural gas pipeline company expects growth across all its business segments. However, its most prominent growth drivers will be its gas pipeline and energy-transition ventures segments. The company recently completed several capital projects that will provide a boost next year. It finished the $158 million expansion of the Kinder Morgan Texas Pipeline system in October and the $283 million first phase related to its Evangeline Pass project, which entered service in July. In addition, Kinder Morgan expects to complete its Autumn Hills renewable natural gas facility this month. The company also completed a small $54 million expansion of its Geismar River Terminal in the fourth quarter.
The energy company has a couple more gas pipeline projects on track to enter service next year. The $154 million expansion of the Kinder Morgan Tejas Pipeline should enter service in two phases next year. Meanwhile, the company expects to complete the remaining phase of its $670 million Evangeline Pass project in July. Kinder Morgan also has a small expansion of its SFPP pipeline on track to enter commercial service in next year's Q3.
The fuel to grow its dividend
Kinder Morgan's growing earnings will enable it to continue increasing its dividend. The company plans to declare $1.17 per share in dividends next year ($0.2925 per quarter). That's up from $1.15 per share in dividends ($0.2875 per quarter) in 2024 (a 1.7% increase). That would mark its eighth straight year of increasing its dividend.
The company can easily afford to continue increasing its dividend. Kinder Morgan expects to generate enough cash to cover its high-yielding payout and capital spending while maintaining a strong balance sheet. The company anticipates ending next year with a 3.8 times leverage ratio. That's down from 4 times at the end of this year and in the lower part of its 3.5 times to 4.5 times target range. That gives it the capacity to make additional investments as acquisition or organic expansion opportunities arise.
Kinder Morgan currently expects to invest $2.3 billion into organic capital projects next year, which it intends to fund with internally generated cash flow. That's about $400 million higher than its 2024 forecast.
It will invest that capital into projects that will enter service through 2028. The company currently has $5.1 billion of organic expansions in its backlog. Notable longer-term projects include a $1.7 billion investment to expand its Southern Natural Gas pipeline joint venture (2028 in-service date) and a $161 million investment in expanding the Gulf Coast Express Pipeline (mid-2026 scheduled completion date). These expansions should give Kinder Morgan the fuel to continue increasing its dividend in the coming years.
That backlog could balloon over the coming year. On its Q3 conference call, Kinder Morgan noted that it's currently seeing a very rich opportunity for future expansion, powered by growing demand for natural gas from power plants and AI data centers. Given its strong balance sheet, it has plenty of financial capacity to secure additional expansion projects in 2025 to enhance and extend its growth profile, providing more fuel for dividend growth.
Another solid year ahead
Kinder Morgan expects to keep growing in 2025. That's giving it the confidence to continue increasing its dividend. That steady upward trend should continue, given the current expansion projects in its backlog and under development. Because of that, Kinder Morgan should be able to continue supplying its investors with a lucrative and growing income stream, making it an ideal income-generating investment for the long term.
