I Keep Adding to This Pipeline Stock. Here's Why the Yield Isn't the Only Reason.

I'm a longtime investor in Williams Companies (NYSE: WMB), having bought the stock on three occasions since 2019. Based in Tulsa, it is one of the larger midstream energy companies, handling roughly one-third of all natural gas produced in the United States.

Williams operates key interstate transmission pipelines, including Transco, the nation's largest natural gas pipeline system by volume, as well as natural gas-gathering networks, processing plants, and storage facilities.

The stock remains in my portfolio because of the company's solid performance. Its shares are up more than 130% in the last decade, not including dividends. If you had bought $10,000 worth of Williams Brothers stock when I did and reinvested the dividends, you would have $42,166.12 now.

That's a pretty good return, and while some investors might take the profits and run, I'm holding onto the stock. Here's why.

Image source: Getty Images.

It has a dependable dividend

The yield on its dividend is 3% at its current share price, lower than the dividend yield of competitors such as Kinder Morgan or Enbridge. However, because of the company's more insulated cash-flow structure, it has boosted its dividend by more than 162% over the past decade, easily outpacing those two competitors.

The company raised its quarterly dividend by 5% this year to $0.525, the 10th consecutive year it has increased its dividend.

On an available funds from operations (AFFO) basis, the dividend is covered by 2.26x, as of the second quarter.

Its business is stable yet positioned for growth

Williams' pipeline footprint, particularly its Haynesville gathering assets and Transco Gulf Coast connections, directly links major gas basins to Gulf Coast export terminals. This positions the company as an indispensable beneficiary of the expansion of U.S. energy export infrastructure.

Global liquefied natural gas (LNG) volumes increased 5.4% to a record 56.3 billion cubic feet per day in 2025.

Williams' contracts are take-or-pay, meaning that power plants, utility companies, and gas producers pay the company either to take delivery of a minimum amount of a commodity, such as natural gas or pipeline capacity, or to pay a penalty if they don't take it.

In Q2, the company reported earnings per share (EPS) of $0.68, up 51%, year over year, and AFFO of $1.45 billion, up 10% over the same period a year ago. Revenue rose 9.7%, year over year, to $3.05 billion.

Data center power needs are driving orders

As of Q2, Williams had a $15.5 billion backlog of orders due to come online between 2027 and 2033. Electricity demand in the U.S. is accelerating rapidly due to data center expansions, artificial intelligence (AI) infrastructure, and industrial electrification.

Williams is expanding its power generation and corridor pipeline projects, with a six-gigawatt backlog of potential projects, to provide a steady, natural gas-backed electricity supply directly to utilities and high-demand energy customers.

The company has 10 project expansions along its Transco pipeline that are already under construction or have signed customer agreements.

Looking past the concerns

The stock is up more than 15% so far this year, and thanks to that, its valuation is high, more than 28 times forward earnings. That's high for a pipeline operator and well above the median for the energy midstream sector. If you look at its enterprise value-to-earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) ratio, it is trading at less than 17 times earnings, still higher than its peers but not out of line considering its growth prospects.

The company recently raised its long-term adjusted EBITDA target to a compound annual growth rate (CAGR) greater than 11% through 2030, driven by power expansion projects and major bolt-on acquisitions.

Even if the stock appears pricey at the moment, it is well positioned to justify its lofty valuation, particularly for long-term investors.

James Halley has positions in Enbridge, Kinder Morgan, and Williams Companies. The Motley Fool has positions in and recommends Enbridge and Kinder Morgan. The Motley Fool has a disclosure policy.