Hess Midstream Has Increased Its Payout 30+ Times Since 2017
With stocks trading at record levels and valuations sky-high, it’s always a good idea to create a buffer for your portfolio that includes reliably growing, ultra-high-yield payouts that are tied to a stock that is actually doing well because of solid fundamentals.
A rising tide lifts all boats, and the same goes for the stock market. Investors afraid of missing out can help send undeserving stocks to record levels. That’s a perfect recipe for losing your shirt.
The goal for passive income investors is not to chase high-yield dividends, but to look for great stocks that provide a growing dividend year after year. And that’s what you get with Hess Midstream LP (NYSE:HESM).
The partnership owns, operates, develops, and acquires oil and gas and water midstream assets in the prolific North Dakota Bakken shale region. Hess Midstream provides its strategic infrastructure assets services primarily to it parent Chevron Corp (NYSE:CVX) and a number of global third parties. (Source: “Investor Relations Presentation,” Hess Midstream LP, July 31, 2025.)
As an oil and gas midstream partnership, Hess is able to take advantage of near- and long-term market strengths, weaknesses, and inherent volatility.
Why?
The partnership is on the receiving end of long-term stable commercial contracts through 2033.
Unlike other midstream companies, the partnership is on the receiving end of a 100%-fixed-fee, revenue-based contract to gather, process, move, store, and export crude oil and natural gas. This, of course, minimizes commodity price exposure.
As a result, the partnership’s bottom line isn’t susceptible to fluctuations in oil and gas prices. Instead, Hess Midstream is like a tollkeeper that collects money whether its clients use its pipelines or not.
On top of that, long-term minimum volume commitments (MVCs) with Chevron, set on a three-year rolling basis (send or pay) and currently set through 2027, provides the partnership with downside protection.
Better still, the partnership’s fees escalate each year based on the Consumer Price Index (CPI).
This provides Hess Midstream with reliable cash flow and opportunities to expand its business. This strategy also endows HESM stockholders with both a reliable dividend and long-term share price gains.
Strong Operational & Financial Results
For the second quarter ended June 30, 2025, Hess Midstream reported revenue of $414.2 million, up 13% from $365.5 million in the second quarter of 2024. (Source: “HESS MIDSTREAM LP REPORTS ESTIMATED RESULTS FOR THE SECOND QUARTER OF 2025,” Hess Midstream LP, July 30, 2025.)
After deduction for noncontrolling interests, the company’s net income for the second quarter was $179.7 million, or $0.74 per share, compared with $0.59 per share in the prior-year quarter. Net cash provided by operating activities for the second quarter of 2025 was $276.9 million.
Hess Midstream generated adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $316.0 million and adjusted free cash flow (FCF) of $193.8 million. Net cash provided by operating activities was $202.4 million.
On an operational front, throughput volumes increased seven percent for gas processing, nine percent for oil terminaling, and 11% for water gathering, primarily due to higher production.
Hess Midstream’s Business Outlook
Hess Midstream reiterated its guidance of approximately 10% growth in gas throughput volumes in 2026, followed by approximately five percent growth in 2027 and five percent growth in oil throughput volumes in each of 2026 and 2027.
This growth allows the partnership to expect at least 10% growth in net income and adjusted EBITDA in 2026, followed by at least five percent growth in 2027.
Hess Midstream continues to expect greater than 10% growth in adjusted FCF in 2026, followed by greater than five percent growth in 2027.
Quarterly Distribution Increased to $0.7370
Hess Midstream is a cash cow that has a history of reporting strong FCF, which it uses to pay dividends and debt. Since 2020, its FCF has grown from $340.6 million to $634.2 million in 2024. (Source: “Hess Midstream LP CI A,” MarketWatch, last accessed August 19, 2025.)
The partnership has raised its dividend for the last eight consecutive years. Most recently, in July, Hess increased its quarterly payout to $0.7370 per unit, or $2.83 per share on an annual basis, for a forward dividend yield of approximately seven percent. (Source: “Distributions,” Hess Midstream LP, last accessed August 19, 2025.)
Commenting on the increase, Jonathan Stein, CFO said, “We continue to execute on our differentiated financial strategy, prioritizing consistent and ongoing return of capital through a combination of targeted distribution growth and the utilization of excess adjusted free cash flow after distributions.” (Source: “Hess Midstream LP Announces Distribution Per Share Level Increase,” Hess Midstream LP, last accessed July 28, 2025.)
“We expect to continue to have more than $1.25 billion of financial flexibility through 2027 that can be used to support our return of capital framework, including potential additional and ongoing repurchases that could support further distribution per share level increases,” Stein concluded.
HESM Stock Hits Record High
HESM stock has continued to do well over the short and long run. Over the last five years, the stock has rallied 252%. On July 31, it hit a new all-time record high of $44.14 per share. HESM continues to trade near that level.
As of the time of writing, the stock is thumping the S&P 500, trading up:
- 16.6% year to date
- 19.0% on an annual basis
Big gains, but conservative analysts on Wall Street expect HESM stock to hit new record highs over the coming quarters, providing a 12-month share price target range of $45.40 to $48.00 per share.
Hitting the lower target would put HESM in record territory.
Chart courtesy of StockCharts.com
The Lowdown on Hess Midstream Partners LP
Hess Midstream Partners LP is a midstream partnership with a strong balance sheet, reporting strong financial results. Thanks to long-term contracts, it’s able to provide strong guidance. This gives it the confidence to target at least five-percent annual distribution growth through 2027.
This is part of the reason why Wall Street is bullish on HESM stock. Currently, 340 institutions hold 88.18% of all outstanding shares. Three of the biggest holders are Alps Advisors Inc, Goldman Sachs Group Inc, and Invesco Ltd. (Source: “Hess Midstream LP (HESM),” Yahoo! Finance, last accessed August 19, 2025.)