When it comes to high-yield investments in the energy sector, midstream stocks can be a promising option. However, not all midstream companies are created equal, and investors would be wise to steer clear of Kinder Morgan (KMI) in favor of more reliable alternatives like Enterprise Products Partners (EPD) and Enbridge (ENB).

Outperforming Kinder Morgan's Dividend Inconsistency

Kinder Morgan's Spotty Dividend History

Kinder Morgan is one of the largest energy infrastructure companies in North America, with a vast network of pipelines, storage facilities, and other midstream assets. While the company's asset base is undoubtedly valuable, its dividend history has been less than stellar. In 2015, Kinder Morgan surprised investors by cutting its dividend by a staggering 75%, despite previously promising a 10% increase. This decision, though necessary for the company's long-term health, eroded trust among dividend-focused investors.More recently, in 2020, Kinder Morgan announced plans to increase its dividend by a substantial 25%, as part of an effort to regain investor confidence. However, the COVID-19 pandemic forced the company to scale back this increase to just 5%. While this was still an improvement over a cut, it demonstrated a continued lack of reliability in Kinder Morgan's dividend policy.

Enterprise and Enbridge: Consistent Dividend Growth

In contrast, Enterprise Products Partners and Enbridge have established themselves as more reliable income investments. Enterprise has increased its distribution for 26 consecutive years, while Enbridge has raised its dividend (in Canadian dollars) for 29 consecutive years. This consistent dividend growth has allowed these companies to reward shareholders through various market conditions, including the 2016 energy downturn and the 2020 pandemic that proved challenging for Kinder Morgan.Like Kinder Morgan, Enterprise and Enbridge are major North American midstream operators, generating reliable cash flows from the energy companies that utilize their pipeline, storage, and transportation infrastructure. This cash flow stability supports their ability to maintain and grow their shareholder payouts, with Enterprise currently offering a 6.8% distribution yield and Enbridge providing a 6.1% dividend yield.

Navigating Structural Differences

One key difference between these companies is their corporate structure. Enterprise is a master limited partnership (MLP), which can involve additional tax complexities for investors, particularly the need to file a K-1 form. Enbridge, on the other hand, is a traditional corporation, but it is headquartered in Canada and pays dividends in Canadian dollars, which can introduce currency fluctuation considerations for U.S. investors.Despite these structural differences, both Enterprise and Enbridge have demonstrated a commitment to reliable and growing income streams, making them attractive alternatives to the more volatile dividend history of Kinder Morgan.

Choosing Reliable Income Investments

For conservative income-focused investors, the choice between Kinder Morgan and its more reliable peers is clear. Kinder Morgan's past dividend cuts and inconsistent payout policies have eroded trust, and its current 4.2% yield may not be enough to compensate for the risk. In contrast, Enterprise and Enbridge offer higher yields (6.8% and 6.1%, respectively) and a proven track record of consistent dividend growth, making them more appealing options for those seeking stable and dependable income streams.By opting for the more reliable dividend histories of Enterprise and Enbridge, investors can potentially enjoy a win-win scenario – higher yields and a greater sense of security in their income investments, even in the face of challenging market conditions.