Western Midstream Partners: A Dividend Giant With a Resilient Business Model and a Robust Yield of 9.4%

Western Midstream Partners (WES) offers a 9.4% yield and has a resilient, fee-based business model with low direct exposure to commodity prices. It benefits from global geopolitical tensions and its infrastructure is critical to the US natural gas system. The company posted $594 million in adjusted EBITDA and $399 million in free cash flow in Q1, with a cash balance of $2.4 billion and guidance for $1.275 billion to $1.475 billion in free cash flows for 2025.

Western Midstream Partners (WES), a midstream infrastructure player, stands out as a resilient investment in the volatile 2025 market. With a robust 9.4% yield and a fee-based business model, WES offers a defensive investment option with low direct exposure to commodity prices. The company's business model, which includes gathering, processing, transporting, and storing natural gas, crude oil, natural gas liquids (NGLs), and produced water, is well-positioned to benefit from global geopolitical tensions and the critical role it plays in the U.S. natural gas system [1].

Western Midstream's financial performance in the first quarter of 2025 was impressive, with $594 million in adjusted EBITDA and $399 million in free cash flow. The company ended the quarter with a cash balance of $2.4 billion and guided for free cash flows in the range of $1.275 billion to $1.475 billion for the year [1]. This financial strength is evident in its dividend coverage ratio of 1.6 times, indicating that net income was 60% more than the amount distributed in dividends. The company has also increased its quarterly dividend distribution by 4% for 2025, reflecting management's confidence in its ability to return capital to shareholders [1].

WES's valuation appears attractive, trading at an enterprise-value-to-EBITDA ratio of 9.8, which is lower than many of its peers. Despite concerns about business concentration risk, the company's focus on fee-based contracts and long-term agreements with clients helps mitigate this risk. Occidental Petroleum, which accounts for nearly 60% of WES's total revenues, is financially healthy and holds a 44.8% ownership stake in the MLP, aligning its interests with those of Western Midstream [1].

The company's recent stock performance has been positive, with shares appreciating by 1.65% over the past month. However, investors should closely monitor the upcoming earnings release, as the company is expected to report earnings of $0.83 per share, down 14.43% from the prior-year quarter. The Zacks Rank system currently rates WES as a #3 (Hold), indicating a moderate investment outlook [2].

In conclusion, Western Midstream Partners offers an attractive combination of a high yield, a resilient business model, and exposure to a strong U.S. energy sector. Despite some concerns about business concentration risk, the company's financial strength and fee-based business model make it an appealing investment option in the current volatile market.

References:
[1] https://www.fool.com/investing/2025/07/15/1-dividend-giant-yielding-over-9-with-big-things-c/
[2] https://www.nasdaq.com/articles/western-midstream-wes-exceeds-market-returns-some-facts-consider