This Top Energy Dividend Stock Is Spending Another $3.1 Billion to Help Support the Unprecedented Demand for Power

Key Points

• The Williams Companies plans to invest another $3.1 billion to build additional gas-fired power projects.

• The gas infrastructure giant continues to capitalize on growing gas demand.

• It should have lots of fuel to grow its earnings and dividends in the coming years.

• 10 stocks we like better than Williams Companies ›

The U.S. is on the cusp of an unprecedented surge in power demand. Forecasters expect the country's electricity needs to soar 31% by 2030, driven by AI data centers and electric vehicles. That's a dramatic acceleration from the 5% overall increase in U.S. power demand over the last 15 years.

The coming surge in power demand will be difficult to supply. However, it presents companies with a significant opportunity to expand their power generation capabilities. The Williams Companies (NYSE: WMB) is emerging as an early leader in seizing this opportunity. The gas infrastructure company has recently agreed to invest $3.1 billion in building additional natural gas-fired power capacity. That will further fuel its earnings and dividend growth engines.

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Capitalizing on surging power demand

Williams is one of the country's largest natural gas infrastructure companies. It primarily gathers, processes, transports, and stores natural gas through its vast network of pipelines and related infrastructure. The company handles a third of the nation's gas supplies.

The company has begun to leverage its expertise in operating gas infrastructure by expanding its platform to include power projects, supporting the surging electricity demand of data centers. The company currently has $1.6 billion worth of projects under construction, which will deliver 400 megawatts (MW) of power to customers.

Williams has since added more power innovation projects to its backlog, recently agreeing to spend $3.1 billion on two more projects. The energy infrastructure company has signed a 10-year, primarily fixed-price power purchase agreement with a large, financially strong customer to back the projects. Williams expects to complete these power projects by the first half of 2027. These additions have expanded its power innovation backlog to $5 billion in projects.

Williams isn't the only energy midstream company investing in gas-fired power generation. Energy Transfer (NYSE: ET) is building eight 10-MW gas-fired electric generation facilities. However, the difference is that Williams is building large-scale projects to support customer demand, while Energy Transfer is building smaller-scale power plants, which will help support its operations in Texas and reduce its reliance on the grid.

More growth ahead

Williams sees tremendous additional opportunities to build more power innovation projects. It's evaluating partnerships and commercial agreements totaling more than 6 gigawatts of potential power innovation projects.

In addition to building power plants, Williams is also expanding several natural gas pipelines to support growing gas demand. The company has projects in the backlog on track to enter commercial service all the way through the third quarter of 2030. This large backlog provides the company with a clear line of sight into its earnings growth through the early part of the next decade. They'll also provide the company with more fuel to grow its 3%-yielding dividend, which it has been increasing at a mid-single-digit annual rate in recent years.

Meanwhile, Williams has many more projects under development to support the growth in gas demand from power facilities and liquefied natural gas (LNG) export terminals. The company is evaluating over $14 billion of expansion project opportunities on its three large-scale gas transmission pipelines (Transco, MountainWest, and Northwest Pipeline) that could enter service in the 2027 through 2033 time frame.

Williams isn't alone in seeing a massive opportunity to build out additional gas pipeline infrastructure in the coming years. Energy Transfer is building two large-scale gas pipelines (Hugh Brinson at $2.7 billion and Desert Southwest Expansion Project at $5.3 billion) to support growing power demand by utilities. Energy Transfer is also evaluating over 200 requests by data centers and more than 60 from power plants to connect these facilities to its pipeline system.

Gas pipeline giant Kinder Morgan has also been a big beneficiary of the expected surge in gas demand. The company has $8.6 billion of gas-related infrastructure projects currently in its backlog, a $6.4 billion increase since the end of 2023. Kinder Morgan is building several new large-scale gas pipeline projects, with in-service dates through 2030.

A good choice for investors

Williams is leveraging its leadership in gas infrastructure to develop a new business that provides gas-fired power directly to customers. With another $3.1 billion in projects recently added, its backlog now stands at $5 billion. It also has exciting growth ahead for its gas pipeline operations. This growth supports Williams' ongoing dividend increases, making it an attractive choice for investors seeking income and high total return potential.

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Matt DiLallo has positions in Energy Transfer and Kinder Morgan. The Motley Fool has positions in and recommends Kinder Morgan. The Motley Fool has a disclosure policy.