Exploring Energy Dividend Stocks: Kimbell Royalty Partners and The Williams Companies
When it comes to investing in energy dividend stocks, many people gravitate towards major players like Chevron and ExxonMobil. However, there are lesser-known stocks that not only offer competitive yields but also present stable business models. This article highlights Kimbell Royalty Partners and The Williams Companies as viable options.
Kimbell Royalty Partners (KRP)
Kimbell isn’t a traditional energy company; instead, it owns mineral rights across 17 million acres in key U.S. basins. Here’s a closer look:
- Revenue Model: Kimbell receives a percentage (12.5% to 25%) of revenue every time an upstream company drills on its land—allowing it to avoid capital expenditures related to drilling and maintenance.
- Dividend Strategy: It typically pays out 75% of its cash available for distribution as dividends. In the latest quarter, its cash distribution was $0.47 per common unit, translating to an annualized yield of 13%.
- Market Position: Despite exposure to oil and gas price fluctuations, Kimbell is less impacted by drilling costs and labor shortages, offering reliable dividends supported by cash flow.
The Williams Companies (WMB)
As a midstream company, Williams operates over 33,000 miles of pipeline in the U.S. Key aspects include:
- Natural Gas Focus: Unlike companies that transport multiple resources, Williams primarily focuses on natural gas—transporting about 30% of the nation’s supply.
- Business Model: It charges “tolls” for transporting resources, making it less vulnerable to price fluctuations in the oil and gas markets.
- Growth Opportunities: Williams is expanding its reach by developing “behind the meter” (BTM) projects which enhance supply to data centers.
Dividend and Financials:
- Dividend Yield: Williams offers a forward yield of 2.76%.
- Financial Health: Its available funds from operations rose 17% year-over-year, with payments being well-covered—indicating room for potential dividend increases.
Summary
Kimbell Royalty Partners and The Williams Companies represent attractive options for income-focused investors. Kimbell offers a high yield with a unique business model, while Williams stands out with steady growth and a solid position in the natural gas market. Both companies could be excellent additions to a diversified energy portfolio.
