High-Yield and High-Growth? This Energy Stock Backs Its 3.7%-Yielding Dividend With Booming AI-Driven Gas Demand.

High-yield dividend stocks tend to be slower-growing companies. However, that's not the case with Kinder Morgan (NYSE: KMI). The natural gas pipeline giant grew adjusted earnings per share by a brisk 32% in the second quarter, driven by robust gas demand. That's providing plenty of support for its 3.7%-yielding dividend.

That strong growth should continue, fueled by rising power demand to support AI data centers and other catalysts. It should give the pipeline stock ample power to continue growing its high-yielding dividend.

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Robust results

Kinder Morgan recently reported its second-quarter results. The gas pipeline giant posted $867 million of net income, a record for the second quarter. Meanwhile, its adjusted earnings rocketed 32% to $0.37 per share.

The company's gas pipeline segment generated nearly $1.5 billion in earnings before depreciation and amortization, up 8.5% from the prior year. Kinder Morgan benefited from a 7% uptick in volumes, driven by liquefied natural gas (LNG) deliveries, increased exports to Mexico, and higher power generation demand. It also benefited from a 17% increase in product pipeline earnings and a 43% surge in carbon dioxide profitability, both largely driven by higher commodity prices.

Booming growth

Kinder Morgan's strong start to the year has it on track to significantly exceed its budget. The company initially expected to generate $1.37 per share of adjusted earnings this year, up about 8% from last year. It now expects to exceed that budget by 12%. The company's higher earnings are further strengthening its balance sheet. It now expects to end the year with a leverage ratio of 3.6 times, down from its 3.8 times target and at the low end of its target range.

The pipeline company completed $660 million of growth capital projects during the quarter. Notable ones included the Cumberland Project to serve a new gas-fired power plant in Tennessee and the expansion of its Gulf Coast Express pipeline to increase gas flow from the Permian Basin to markets in South Texas. It ended the quarter with a $9.6 billion backlog of expansion projects, down $500 million from the first quarter. However, the company's board recently provided contingent approval for nearly $400 million in additional projects that aren't currently in the backlog, with the bulk supporting power generation and local distribution company demand. These secured projects provide visibility into growth through 2030.

AI power demand is emerging as a major catalyst for gas demand. There are currently 277 gigawatts of power demand from data centers under development in the U.S., representing 42 billion cubic feet per day of potential natural gas capacity to meet peak demand. While developers won't build all that capacity and gas won't be the only power source, it's a meaningful long-term growth driver for Kinder Morgan. It's currently pursuing more than $10 billion of additional gas infrastructure expansion opportunities beyond its current backlog to further enhance and extend its growth profile.

High-powered total return potential

Kinder Morgan has increased its high-yielding dividend for nine straight years. That trend seems likely to continue due to surging gas demand from AI power and other catalysts. This growth and income combo should give Kinder Morgan the fuel to generate high-octane total returns, making it a great way to cash in on the AI boom.

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