A pipeline business may be a great source of passive income. Long-term contracts and government-regulated rates help them produce consistent cash flow. So they have a lot of consistent income from which to distribute dividends.
The takeaway is that people getting close to retirement age should add a high-quality pipeline stock to their portfolio. In addition, companies like Kinder Morgan (KMI 1.28 percent), Activision Blizzard (ATVI 0.55 percent), ONEOK (OKE -1.04 percent), and Williams Companies are excellent sources of passive income (WMB 0.92 percent ).and second analysts are the best stocks to buy now.
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1. ONEOK (NYSE: OKE)
ONEOK is reliable in its dividend payments. Regarding dividends, the pipeline company has been dedicated for over 25 years. For the most part, payouts have gone up over the years, and they’ve increased at a rate of 13% per year on average since 2000.
The firm has a healthy financial position despite spending $5 billion on expansion over the past few years. With such a large amount of slack capacity, the company is set up to capitalize on expected demand increases in the future. To back up its dividend and fortify its balance sheet, ONEOK is generating significant free cash flow. This paves the way for additional growth initiatives to be undertaken.
These characteristics provide a solid support for the company’s dividend payout of 6.5%. For investors seeking a passive income, ONEOK is an excellent choice due to the continued growth of this payout as volume increases.
2. Williams Corporations (NYSE: WMB)
Considering In 1974, Williams Companies consistently distributed a dividend every three months. Dividend payments have not always been stable or increased, but the company is confident in its ability. The company has taken several measures to strengthen its balance sheet and cash flow, laying a more solid groundwork for the payout.
This natural gas pipeline company expects to generate over $2.2 billion in cash flow next year, which is more than enough to cover the dividend payment. This means it can fund its entire growth capital expenditures plan, including the price of its most recent acquisition, without using any of its cash on hand. It will help the company further strengthen its already solid financial position.
Williams Companies has numerous growth projects in development. It invests $1.5 billion across six separate projects to increase its interstate pipeline network. In addition, gathering and processing capacities are growing, and new products in the Gulf of Mexico are linked to the existing system. For the next few years, these endeavors should increase their cash flow.
Williams, meanwhile, is eyeing another two dozen opportunities to expand its natural gas pipelines, potentially worth $8 billion in investments over the next decade. In addition, Williams has a solid financial standing, allowing it to sustainably grow its business and dividend payout of 5.3% for many years.
3. Kinder Morgan (NYSE: KMI)
Nearly $5 billion in distributable cash flow is expected to be generated by Kinder Morgan this year. In this fiscal year, dividends account for less than 55% of the company’s earnings. As a result, it will be able to save enough money to pay for its expansion plan with a cushion of about $900 million, ensuring the dividend’s long-term viability. In addition, the company can use the surplus cash to fortify its balance sheet, increase its holdings in high-return investments, or repurchase shares when the price is right.
With the money it has invested, the business should see a rise in its cash flow. Kinder Morgan has just approved a new natural gas pipeline expansion project to develop its renewable natural gas business further. As a result, opportunities to expand those businesses are plentiful, the company believes.
And that should allow Kinder Morgan to maintain its 6% dividend growth rate. Over the past five years, the pipeline behemoth has consistently increased its dividend payment. This dividend is rising in value, making it an excellent choice for passive income.
4: Activision Blizzard (NASDAQ: ATVI)
Thanks to its $8.3 billion in annual sales, Activision is among the world’s top video game publishers. World of Warcraft, Call of Duty, Overwatch, and the mobile game Candy Crush are just a few of the titles published by the company. Activision had 372 million MAUs across all games for the first three months.
If you’re looking for a reliable stock investment, this one might be worth your time. Activision might be it. The reason is that Microsoft is offering $95 per share to acquire the entire company in an all-cash transaction valued at $68 billion, while the stock is currently trading for only $79.79.
The Federal Trade Commission (FTC) has shown more significant efforts to keep a tight leash on big tech, so investors were initially skeptical that the agency would approve the deal. That’s why there’s a discount between the buyout offer and Activision’s stock price, but it’s more likely that the FTC will approve the deal.
Moffett Nathanson changed their recommendation on Activision stock to “buy” not too long ago. There is so much faith in Microsoft’s $68 billion offer that even Warren Buffett’s Berkshire Hathaway has amassed a $5 billion stake in the game developer.
We anticipate closing the deal in the final months of Microsoft’s fiscal 2023, which will end in June of that year. Shareholders of Activision will receive $95 per share upon closing, an 18% premium over the stock’s current price.
You should consider buying Activision stock as a hedge against a further market decline.
Conclusion:
Pipelines are a reliable source of revenue for companies like ONEOK, Kinder Morgan, Activision Blizzard, and Williams Companies. That has provided them with a solid financial foundation upon which they can build their pipeline infrastructure and pay generous dividends to their shareholders. In addition, they should be able to use that as fuel to increase dividends in the years ahead, making them an excellent option for retirees looking to build up a passive income stream.
