2 Energy Giants Practically Mint Cash

Unlike upstream drillers who live by the barrel, Energy Transfer and Kinder Morgan quietly rake in stable cash flows by simply moving, storing, and processing hydrocarbons. Their businesses are mostly fee-based, and that makes them unusually resilient, especially in a market that punishes volatility.

Let’s dig into why these two midstream powerhouses are in a class of their own when it comes to cash generation, and why income investors should be paying attention.

Key Points

• Energy Transfer and Kinder Morgan earn predictable cash flows from pipeline tolls, not commodity prices, making them resilient in volatile markets.

• Both are pouring billions into expansion projects—like LNG terminals and carbon capture—to fuel long-term cash flow and dividend growth.

• Energy Transfer yields over 7%, Kinder Morgan over 4%, both with low payout ratios and a clear path to increasing shareholder returns.

Energy Transfer Is A Behemoth That’s Just Getting Louder

If you were to trace how oil, gas, or natural gas liquids move across the United States, chances are you’d be sketching a path across Energy Transfer’s 130,000-mile pipeline network.

It’s the circulatory system of American energy, touching every major production basin and feeding export terminals along the Gulf Coast.

What most investors don’t realize is that more than 90% of Energy Transfer’s earnings are contractually locked in through fee-based or regulated mechanisms, meaning revenue doesn’t swing wildly with the price of oil.

In the first quarter of 2025, the company generated over $2 billion in distributable cash flow, and it paid out less than half of that in distributions to unitholders.

That leaves a massive buffer, which the company is funneling into expansion projects, like its multi-billion dollar slate of growth initiatives scheduled through 2026. These include LNG export terminals and new natural gas takeaway capacity from the Permian Basin, two areas expected to drive U.S. energy growth over the next decade.

Here’s what’s especially rare: Energy Transfer’s leadership has committed to raising its distribution by 3–5% annually. With a current yield hovering north of 7%, that’s not just attractive, it’s unusually generous in today’s income-starved world.

And here’s a detail many overlook: Energy Transfer’s co-founder and Executive Chairman, Kelcy Warren, owns hundreds of millions of dollars’ worth of units personally. That alignment with shareholders, combined with a history of aggressively buying back debt and reinvesting retained cash, makes this MLP more than just a passive income machine. It’s an owner-operator story with skin in the game.

1 Infrastructure Giant You Can’t Easily Replace

If Energy Transfer is the muscle behind U.S. energy logistics, Kinder Morgan is the backbone. It controls one of the largest natural gas pipeline networks in North America, transporting roughly 40% of the natural gas consumed in the U.S. But what sets it apart isn’t just size, it’s contract quality.

Almost 65% of Kinder Morgan’s cash flow comes from take-or-pay contracts. These agreements lock in revenue regardless of how much product is moved, effectively eliminating volume risk.

Add in another 5% that’s hedged and over 25% more that comes from fee-based operations with minimal exposure to market swings, and you have a business that behaves more like a utility than a traditional energy company.

In Q1 of this year, Kinder Morgan produced over $1 billion in operating cash flow, enough to cover its dividend by a solid 2-to-1 margin. That means the company isn’t just sustaining its payout, it’s expanding its footprint while maintaining financial flexibility.

One project worth watching: the company is investing heavily in carbon capture and storage. Kinder Morgan owns or operates more CO₂ pipelines than any other U.S. company, a fact that puts it at the center of a nascent but potentially massive market as industries race to decarbonize.

With $8.8 billion in expansion projects currently under construction, spanning CCS, LNG, and traditional pipelines, Kinder Morgan is quietly positioning itself for the next phase of energy evolution.

Finally, the company once contemplated converting into a REIT because of how stable and infrastructure-like its cash flows have become. It didn’t go that route, but the mere fact it could is telling.

Why These Midstream Titans Deserve a Spot in Your Portfolio

What unites Energy Transfer and Kinder Morgan is a business model that has decoupled from the daily noise of oil and gas markets. These are toll collectors, not speculators. Their pipelines and terminals don’t care whether crude is $70 or $100 a barrel, they collect fees either way.

Better yet, both companies are reinvesting a healthy chunk of their retained cash into infrastructure that will pay dividends for years to come, literally and figuratively. With dividend yields over 4% for Kinder Morgan and 7% for Energy Transfer, plus visibility into annual payout growth, these companies are built for income investors who value stability and long-term growth.

As the world leans into energy demand from new frontiers, AI data centers, LNG exports, industrial reshoring, these midstream networks become more vital, not less. And unlike tech or consumer stocks, their valuations remain modest.

In an era where cash is king and consistency is rare, Energy Transfer and Kinder Morgan might just be the closest thing to a money printer you can legally own.