Hess Midstream LP offers one of the highest dividend yields in the midstream energy sector, with a current distribution yielding approximately 8.3 percent and a track record of consistent quarterly increases. The company has grown its dividend roughly 10 percent annually, supported by fee-based revenue from oil and gas gathering, processing, and terminaling assets in the Bakken shale. For income investors seeking energy exposure with above-average yield, HESM warrants attention.
The setup
Hess Midstream operates infrastructure assets tied to Hess Corporation’s Bakken production. Unlike exploration and production companies, Hess Midstream earns fees for moving and processing hydrocarbons rather than selling commodities directly. That fee-based model reduces commodity price sensitivity and supports stable cash flows for dividend payments.
The company is structured as a C-corporation, not a master limited partnership. Investors receive Form 1099-DIV rather than Schedule K-1, which simplifies tax reporting. Dividends are typically paid quarterly.
Key numbers
| Metric | Value |
|---|---|
| Current yield | ~8.3% |
| Annual dividend growth rate | ~10% |
| Dividend frequency | Quarterly |
| Corporate structure | C-corporation (1099-DIV) |
| Primary asset base | Bakken shale infrastructure |
Hess Midstream has increased its dividend every quarter for multiple years. The pattern of 1 to 3 percent quarterly hikes compounds to roughly 10 percent annual growth. Management has signaled confidence in maintaining this trajectory through contract renewals and volume commitments from Hess Corporation.
What to watch
The single largest risk to Hess Midstream is customer concentration. A majority of revenue comes from contracts with Hess Corporation. If Hess reduces Bakken drilling activity or shifts volumes to competing pipelines, Hess Midstream’s cash flows would decline.
Energy prices also matter indirectly. While Hess Midstream is fee-based, prolonged low oil prices can reduce production volumes and infrastructure utilization. Investors should monitor Bakken rig counts and Hess Corporation’s capital expenditure guidance.
Midstream energy peer comparison
Hess Midstream competes for investor capital with larger midstream names. Enbridge, a Canadian pipeline giant, yields approximately 5.3 percent and has raised its dividend for 29 consecutive years. Enterprise Products Partners offers a 7.2 percent yield with a stronger balance sheet. MPLX LP, affiliated with Marathon Petroleum, yields around 7.8 percent and operates a broader geographic footprint.
| Company | Ticker | Yield | Structure |
|---|---|---|---|
| Hess Midstream | HESM | ~8.3% | C-corp |
| Enbridge | ENB | ~5.3% | C-corp |
| Enterprise Products | EPD | ~7.2% | MLP |
| MPLX LP | MPLX | ~7.8% | MLP |
Hess Midstream’s yield is the highest in this group, but it comes with customer concentration risk that Enbridge and Enterprise Products do not face. Diversified midstream companies serve multiple producers across several basins.
Tax considerations for income investors
Hess Midstream’s C-corporation structure simplifies tax reporting compared to master limited partnerships. MLP investors receive Schedule K-1 forms, which can complicate tax preparation and delay filing. HESM investors receive standard Form 1099-DIV.
However, the 8.3 percent yield may include a mix of qualified dividends and return of capital depending on the company’s taxable income. Investors should review the 1099-DIV breakdown at tax time. Consult a tax advisor to understand how HESM dividends affect your specific situation.
Bottom line
Hess Midstream is a high-yield play for investors who understand energy sector risks. The 8.3 percent yield is roughly six times the S&P 500 average and exceeds most investment-grade bond yields. A $100,000 investment would generate approximately $8,300 in annual dividend income.
The fee-based model and contract structure provide more stability than pure commodity exposure. However, customer concentration and energy price sensitivity mean HESM should represent only a portion of a diversified income portfolio.
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