The outlook for midstream dividends is as constructive as it’s been in years, and while the first quarter earnings season has not wrapped up yet, there have been several dividend increases announced already.
One of the key themes for the midstream and MLP space in 2022 has been the meaningful return of dividend growth, according to Stacey Morris, CFA, director of research at Alerian.
The fourth quarter of 2021 marked the second consecutive quarter in which there were no dividend cuts across Alerian’s midstream indexes.
Going into first quarter earnings, TC Energy (TRP) already declared a 3.4% increase for its April payout. Western Midstream (WES) and Plains All American (PAA) previously guided to distribution increases of 53% and 21%, respectively, for their next payouts. DCP Midstream (DCP) also expects to increase its distribution this year, targeting a 10% hike, according to Morris.
Kinder Morgan Inc. (KMI) raised its dividend as guided, representing a 3% increase over the first quarter of 2021 and marking the fifth consecutive annual increase.
Cheniere Energy Partners (CQP) also raised its dividend by 50%, amounting to an additional $0.35 per share. Hess Midstream LP (HESM) increased its dividend per share level by 5%.
Crestwood Equity Partners LP (CEQP) declared the partnership’s quarterly cash distribution of $0.655 per limited partner unit for the first quarter, which represents an approximate 5% increase quarter-over-quarter.
Energy Transfer (ET) also raised its dividend, declaring a $0.20 per share quarterly dividend, a 14.3% increase from the prior dividend of $0.175.
According to Morris, dividend growth is stemming from improved financial flexibility as companies have made progress with strengthening their balance sheets and continue to generate significant free cash flow.
ETFs whose indexes provide exposure to these companies include the Alerian Energy Infrastructure ETF (ENFR) and the Alerian MLP ETF (AMLP).
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