Hello fellow dividend investors,

Hess Midstream just fell ~10%, pushing its yield to ~8.3%—so I pounced. In today’s breakdown, I explain the bad news, why the dividend policy still looks intact, and my logic for why I’m buying more.

Today’s topics:

• HESM stock analysis

• Why it sold off 10% on Friday

• Why I’m still buying

• All my buys for the week

The Key Story

My Top Undervalued Dividend Stock To Buy Now (8.3% Yield + 10% Growth)

(Ticker: HESM — Hess Midstream LP)

What happened (0:00 — HESM stock crash)

• HESM fell ~10% on Friday. I used the drop to add 83 shares (now 448 total). It’s now my #2 dividend payer in my long-term portfolio.

• Core question: Is the dividend at risk — or is this a buying opportunity?

Why it sold off (2:28 — Bad News Explained)

• Chevron (now HESM’s sponsor and largest customer) will reduce Bakken activity from 4 rigs to 3 starting Q4 2025.

• HESM issued updated outlook:

  • Gas throughput: still growing through 2027.

  • Oil throughput: now expected to plateau in 2026 (was growth before).

  • 2026 Adjusted EBITDA: now flat vs. 2025; growth resumes in 2027 (helped by inflation escalators in contracts).

• HESM is midstream (fee-based, volume-driven) with minimum volume commitments (MVCs) that cushion downside.

Balance sheet, capex, and dividend (7:52 — Stock Analysis & Dividend)

• Target leverage ~3x EBITDA (conservative for midstream).

• Capex cut: suspending the Kappa/CAFA gas plant frees cash for dividends/buybacks.

• Dividend policy unchanged: targeting ≥5% annual growth through 2027.

  • Track record: ~11% 5-yr CAGR, ~10.3% YoY, quarterly raises (latest +3.83%).

• Post-selloff yield ~8.34%, among the highest in 3 years for HESM.

Why I like it in a lower oil price world (macro context)

• Producers’ earnings are sensitive to oil price; HESM’s fee-based MVC contracts (through 2033) reduce commodity exposure.

• Even with one fewer rig, gas volumes trend higher as pads mature; MVCs + inflation escalators support revenue.

Valuation snapshot (11:10 — DDM Valuation)

• Using a conservative Dividend Discount Model example:

  • At 10% discount rate and 5% dividend growth → fair value implies ~36% undervalued.

  • At 7% growth (long horizon) → larger undervaluation; at 13% discount rate → still ~10% undervalued in my example set.

• Takeaway: Risk-reward looks compelling if dividend growth persists at ≥5%.

Risks & watch items

• Chevron development plan (December update): new guidance + 2028 MVCs.

• Further rig reductions would pressure oil-side volumes (partly offset by MVCs/inflation escalators).

• Weather/maintenance can temporarily pull 2025 gas throughput to the low end of guidance; some third-party volumes are lighter in Q4.

Speculation corner (12:34 — Chevron Acquisition)

• Some investors speculate Chevron could buy HESM. A lower share price could theoretically make that easier.

• My stance: I’d prefer HESM not get acquired; I want the long-term dividend compounding. Treat M&A as speculation, not the core thesis.

My move (not advice)

• I’m adding on weakness because I believe the 8%+ yield + ongoing growth + contracted cash flows create an attractive setup.

• Always do your own research.

—
P.S. I analyzed all of this with my stock research tools at DividendData.com if you want to dig in yourself.

My Buys This Week

HESM falls, I Buy More

That’s it for this week’s update. If you want to follow along in real time, analyze these tickers, or track your own portfolio, jump into DividendData.com. You’ll also find our Discord community and my AI research assistant there. Hit reply and tell me what you’re buying—I may feature a few notes next week.

📅 Keep Investing. Stay informed.

– Zach
Founder, Dividend Data

P.S. Questions or suggestions? Reply to this email—I'd love your feedback!

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Disclaimer: Dividend Dividend (Dividend Data LLC) is not a professional financial service. All materials released from Dividend Data (Dividend Data LLC) are for educational and entertainment purposes. Dividend Data (Dividend Data LLC) is not a replacement for a professional's opinion. Contributors to the Dividend Data (Dividend Data LLC) might have equities mentioned in the newsletter