2 Dividend Stocks to Hold for the Next 5 Years

Key Points

• ConocoPhillips expects to add an incremental $7 billion in annual free cash flow by 2029.

• Kinder Morgan has growth capital projects lined up to enter service through the middle of 2030.

• These companies should have plenty of fuel to continue increasing their dividends.

• 10 stocks we like better than ConocoPhillips ›

Dividend stocks often make excellent long-term investments. The best ones produce attractive dividend income that grows at a healthy rate each year.

Some companies are in a better position than others for dividend growth. ConocoPhillips (NYSE: COP) and Kinder Morgan (NYSE: KMI) stand out due to their visible growth profiles and strong track records of increasing their payouts. Those factors make them compelling dividend stocks to buy and hold for the next five years.

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High-octane dividend growth for years to come

ConocoPhillips has built one of the deepest, most durable, and diverse portfolios in the oil and gas industry. The energy company has decades of oil and gas resources with a cost of supply below $40 a barrel. That enables it to generate lots of cash flow in any market environment.

The oil company is entering a major growth phase. It's investing in several longer-cycle capital projects that should start producing over the next several years, including three liquefied natural gas (LNG) export facilities that should come on line over the next few years.

It's also investing $7 billion into its Willow project in Alaska, which should start up in 2029. And the company expects to capture another $1 billion of cost savings and margin enhancements related to its acquisition of Marathon Oil next year. These catalysts should provide the company with $7 billion of incremental annual free cash flow by 2029.

The company is working to enhance and extend its growth profile. It has recently signed two deals to purchase LNG from export terminals currently under development. They're part of its strategy to build a global portfolio of purchase agreements, diversifying and expanding its LNG platform.

The company's robust and growing free cash flow should enable it to continue increasing its 3.4%-yielding dividend. Management aims to deliver dividend growth within the top 25% of companies in the S&P 500.

It has increased its payout every year for nearly a decade. And ConocoPhillips plans to repurchase a significant number of its shares in the coming years, which should further support its ability to increase its dividend per share.

The power to grow through 2030

Kinder Morgan is one of the largest energy infrastructure companies in the country. It operates one of the country's largest natural gas, refined products, and carbon dioxide pipeline systems. Nearly 70% of its cash flow comes from bankable take-or-pay and hedging contracts. Most of its remaining earnings come from stable fee-based agreements.

The company pays out less than half of its stable cash flow in dividends (at a 4.2% yield). It retains the rest to invest in expansion projects and maintain its strong financial flexibility.

Kinder Morgan currently has $9.3 billion in growth capital projects in its backlog -- more than triple its total at the end of 2023. Most of these projects ($8.6 billion worth) are new natural gas pipelines to meet rising demand from LNG and power plants.

The company anticipates these projects will be operational by the second quarter of 2030, providing strong visibility into future growth. This should provide it with ample capacity to continue increasing its dividend, which it has done for eight consecutive years.

The pipeline company has numerous expansion projects under development to support the anticipated surge in gas demand. And its strong balance sheet gives it the flexibility to make acquisitions as opportunities arise.

It bought a gas-gathering and processing system in North Dakota earlier this year for $640 million. Securing more expansion projects or acquisitions would further enhance its ability to increase its high-yielding dividend.

Ample dividend growth ahead

ConocoPhillips and Kinder Morgan have clear growth catalysts to support sustained dividend increases over the next several years. That makes them ideal dividend stocks to hold into the 2030s.

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