The War With Iran is Fueling Substantially Higher Earnings for This High-Yielding Energy Stock

Kinder Morgan (NYSE: KMI) recently reported its first-quarter financial results. Despite being a primarily fee-based energy midstream company, it delivered substantial financial outperformance in the quarter, driven in part by the war with Iran. While many hope that the war will only cause a temporary disruption to the global energy market, it could still have a lasting impact by driving more countries to secure oil and liquefied natural gas (LNG) supplies from the U.S.

Here's a look at the pipeline company's strong quarter and what it sees ahead.

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A war-fueled earnings boost

Kinder Morgan's earnings surged 38% year-over-year to $0.44 per share, while rocketing 41% on an adjusted basis to $0.48 per share. All the company's business segments were up during the quarter. That supported the company's plan to increase its dividend by another 2%, extending its growth streak to nine consecutive years and boosting its yield to 3.8%.

The biggest driver was Kinder Morgan's natural gas pipeline segment. It generated $1.8 billion of earnings before depreciation and amortization, up 17% from last year. The company benefited from high contributions on its Texas Intrastate system due to cold winter weather. Meanwhile, natural gas transportation volumes rose 8%, due primarily to LNG deliveries on the Tennessee Gas Pipeline. The U.S. exported record LNG volumes in March due to the war, which knocked 20% of global supplies offline.

Kinder Morgan also saw higher earnings across its products pipeline, terminals, and carbon dioxide segments. The company benefited from higher commodity prices across its transmix business, higher rates and fees at its Houston Ship Channel hub facilities, and contributions from its renewable natural gas business.

More growth ahead

Kinder Morgan's strong first quarter puts it on pace to deliver better-than-expected earnings this year. Its earnings are currently on track to be more than 3% above budget, and that's before the impact of its recently announced acquisition of the Monument Pipeline.

Meanwhile, the company continues to secure new expansion projects. It added $375 million of projects during the quarter, while completing $230 million, pushing its backlog to $10.1 billion. That doesn't include the proposed Western Gateway Pipeline project that Kinder Morgan and its partner, Phillips 66, are close to approving.

The company noted that it's seeing strong customer interest in developing additional natural gas infrastructure. The war with Iran is driving incremental demand for U.S. LNG, which should necessitate additional gas pipeline expansion projects. Additionally, gas demand by the power sector to support AI data centers remains robust.

A strong quarter with more to come

Kinder Morgan got off to a strong start this year, fueled in part by the war with Iran. That conflict should drive future growth as more countries seek to diversify their LNG supplies with U.S. volumes. The company's growing earnings will give it more fuel to increase its dividend, positioning it to generate robust total returns. That high total return potential makes Kinder Morgan an ideal energy stock to buy, especially for those seeking a high-yielding income stream.

Matt DiLallo has positions in Kinder Morgan and Phillips 66. The Motley Fool has positions in and recommends Kinder Morgan. The Motley Fool recommends Phillips 66. The Motley Fool has a disclosure policy.