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Kinder Morgan (NYSE: KMI) used to be an income investor's dream stock. Not only did it pay a fat current yield, but it claimed to have clear visibility to grow the payout by double digits through 2020. Unfortunately, its less-than-pristine balance sheet, when combined with a deteriorating energy market, forced it to change its tune. As a result, Kinder Morgan slashed the payout 75% late last year, and won't resume growth until it gets its debt to a more sustainable target level. Because of that, there are better stocks out there for investors seeking a growing income stream.
A better dividend pipeline
Canadian energy infrastructure giant Enbridge(NYSE: ENB) has two advantages over Kinder Morgan. First, with a current yield of 3.7%, investors buying today will collect more income in the near term versus those buying Kinder Morgan's 2.3% yield. Furthermore, Enbridge recently announced a transformative acquisition that will not only make it the largest energy infrastructure in North America but the fastest-growing company in the space. The combined company boasts an industry-leading $20 billion growth project backlog, compared to just $13.5 billion at Kinder Morgan. Enbridge estimates that those primarily fee-based projects will deliver 12% to 14% growth in its available cash flow from operations through 2019. Furthermore, when combined with its $37 billion development pipeline, Enbridge believes it can grow its dividend by 10% to 12% annually through 2024.
In addition to the higher yield and stronger growth, Enbridge has two other advantages over Kinder Morgan. With 96% of its cash flow secured by fee-based assets, it has less exposure to commodity price volatility than Kinder Morgan, which only gets 91% of its cash flow from fees. Furthermore, Enbridge's credit rating of BBB+/Baa2 is stronger than Kinder Morgan's BBB-/Baa3 rating, which provides it greater access to capital at cheaper rates to fund its growth pipeline. Add it up, and Enbridge currently beats Kinder Morgan on nearly every metric that matters.
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Leading pure-play renewable power company Brookfield Renewable Partners (NYSE: BEP) also trounces Kinder Morgan when it comes to current yield. At nearly 6%, investors can earn close to three times as much income on their initial investment. That payout is rock-solid because like Enbridge and Kinder Morgan, long-term contracts secure roughly 90% of Brookfield's revenue, providing it with relatively stable cash flow.
Brookfield Renewable Partners is aiming to grow its distribution by 5% to 9% per year, with that growth driven by several proprietary wind and hydro projects currently under development. That combination of a robust current yield and visible distribution growth supports Brookfield Renewable Partners' view that it can deliver 12% to 15% total returns on a per-share basis going forward. While that is slightly less than Enbridge's projection to achieve a 16% total return annually, it represents a pretty compelling option for investors looking to power their portfolio with clean energy.
A healthy yield with healthy growth
Hospital REIT Medical Properties Trust (NYSE: MPW) offers the highest current yield of the group at 6.2%. Supporting that payout are long-term leases with best-in-class hospital operators, which provide the company steady cash flow via monthly rent payments. Meanwhile, the company's ability to acquire hospitals at compelling initial cash rates drives a steadily growing dividend, which is up 15% since the beginning of 2014.
After recently repositioning the company and deleveraging its balance sheet, Medical Properties is in the position to accelerate its acquisition strategy to drive cash flow and dividend growth. The company currently estimates that the hospital real estate market is half a trillion dollars in size, giving it ample opportunity for accretive acquisitions. In fact, it just spent $1.25 billion to acquire nine hospitals, boosting its asset base by 29% and earnings by 10% per share. With ample liquidity remaining, Medical Properties Trust has plenty of growth ahead of it as it expands its hospital portfolio.
Kinder Morgan currently does not offer investors a compelling combination of current income and visible growth. Because of that, there are better options for investors seeking both growth and income, with Enbridge, Brookfield Renewable Partners, and Medical Properties Trust among the best options, in my opinion.
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Matt DiLallo owns shares of Kinder Morgan and Medical Properties Trust and has the following options: short January 2018 $30 puts on Kinder Morgan and long January 2018 $30 calls on Kinder Morgan. The Motley Fool owns shares of and recommends Kinder Morgan. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.