Investors seeking high and reliable dividend yield amid volatility could consider Western Midstream Partners (WES). Its focus on returning higher cash to its shareholders and an ultra-high yield of 9.6% makes it a compelling income stock to consider now.
Western Midstream operates in the midstream segment of the energy industry, a space known for its stable cash flow characteristics. The company’s core operations include gathering and transporting oil and gas and the disposal of produced water. It also markets natural gas, NGLs, and condensates under specific processing agreements. This diversified service offering positions WES to generate consistent revenue, even as energy markets fluctuate.
WES Is Built for Stability and Growth
WES benefits from a large, high-quality asset base spread across multiple productive basins in the U.S. These assets are not only strategically located, but also modernized with advanced processing, measurement, and operating technologies. This sets the company up for long-term operational efficiency and the ability to attract more volume from key upstream producers.
A significant strength of Western Midstream is its ability to generate low-volatility cash flows, even amid commodity price fluctuations. WES focuses on fee-based contracts with protective features like minimum-volume commitments and cost-of-service provisions. These mechanisms ensure the company continues to bring in steady revenue, which helps support its generous payouts to investors.
As of year-end 2024, WES had 95% of its wellhead natural gas and 100% of its crude oil and produced water throughput, covered by these fee-based agreements. That means most of its revenue isn’t directly exposed to fluctuating commodity prices.
Western Midstream’s long-standing partnership with Occidental Petroleum (OXY) is another positive. This relationship aligns WES with a major upstream player and provides capital-efficient growth opportunities tied to Occidental’s development plans. It’s a unique synergy that adds stability and upside potential to WES’s business model.
Financially, Western Midstream is well-equipped to handle both organic expansion and acquisitions. Its robust operating cash flow, ample borrowing capacity, and access to capital markets provide the liquidity needed to seize strategic growth opportunities. The company’s long-term debt profile and solid relationships in the financial community add to its overall resilience.
Thanks to strong financial performance and a healthy underlying business, WES has consistently increased its base distribution over the years. Since 2021, the company’s annual base dividend per share has jumped from $1.27 to $3.20 in 2024 and now $3.50 — an impressive rise reflecting operational strength and growing free cash flow. Looking ahead, WES aims for continued distribution growth in the mid-to-low single digits each year.
The Bottom Line on This Dividend Stock
Western Midstream Partners’ fee-based operating model has built a strong foundation for stability and growth. This approach enables it to deliver more predictable cash flows and financial resilience even during challenging market conditions.
The company is expanding its footprint through organic growth and strategic acquisitions. By continually investing in economically viable development and expansion projects, it efficiently meets rising demand for its services while also creating opportunities for long-term growth.
Mergers and acquisitions significantly influence the company’s broader growth agenda. Western Midstream strategically targets new assets, business lines, and geographies to add to its portfolio. When combined with steady organic growth, these accretive acquisitions will support the company’s goal of maintaining a healthy return and driving sustained distribution growth over time.
Further, Western Midstream’s focus on controlling operating and administrative costs in check bodes well for future growth. Its efforts to enhance productivity will help generate meaningful cost savings and support overall profitability.
Despite these strengths, the stock carries a “Hold” consensus rating from Wall Street analysts, mainly due to macroeconomic risks. The ongoing trade tensions could push operating and capital costs higher for the company, which may pressure its margins and distributions.
Still, Western Midstream presents a compelling case for income-focused investors. Its forward yield of 9.6% stands out, especially given the company’s stable cash flows and commitment to returning more cash to its shareholders.
