Better Dividend Stock: Kinder Morgan vs. Enterprise Products Partners

Reuben Gregg Brewer, The Motley Fool

Sat, Jun 28, 2025, 5:24 PM 4 min read

• Kinder Morgan is one of the largest midstream operators in North America.

• Enterprise Products Partners is one of the largest midstream operators in North America.

• One of these two midstream giants has a better track record of reliably paying investors for sticking around.

• 10 stocks we like better than Kinder Morgan ›

If you are looking at Kinder Morgan (NYSE: KMI) and its 4.1% dividend yield, you should also consider Enterprise Products Partners (NYSE: EPD) and its 6.8% distribution yield. But the reason for preferring Enterprise over Kinder Morgan is only partly to do with the yield, particularly if you are a dividend-focused investor. Here's what you need to know to decide between these two midstream giants.

From a big-picture perspective, both Kinder Morgan and Enterprise Products Partners operate in the energy sector. This sector is known for being volatile, thanks to the huge impact that oil and natural gas prices have on the financial results of most energy companies. But not all energy companies, since Kinder Morgan and Enterprise are largely toll takers, charging fees for moving oil and natural gas around the world.

Essentially, these midstream players sit between the upstream (energy production) and the downstream (chemicals and refining). The pipelines, storage, and transportation assets they own generate reliable fees, with the price of the commodities moving through their systems far less important than demand for the services they provide. And demand for energy tends to be fairly high even when energy prices are low. So both Kinder Morgan and Enterprise have attractive and reliable business models in what is an otherwise volatile industry.

From this perspective, Kinder Morgan and Enterprise are very similar. They are also very similar when it comes to the size of their asset portfolios, which are among the largest in North America. In fact, both businesses have market caps in the $60 billion to $70 billion range. But they aren't interchangeable.

Midstream investments are generally considered for the reliable income stream they provide to investors. The lofty dividend yields of both Kinder Morgan and Enterprise are part of that story. However, there's a back history that investors shouldn't ignore.

In 2016, the energy sector was going through a difficult period. Enterprise increased its distribution. Kinder Morgan cut its distribution by 75%. To be fair, it was the right move for the company, but it was a terrible outcome for income investors. The real problem, however, is that just a couple of months prior to the cut, management was guiding for a dividend increase of as much as 10%.