Happy Monday,
My top high-yield dividend stock, Hess Midstream ($HESM), just crashed 14.63% in a single day. It's about 25% of my dividend portfolio, paying me over $8,000 a year. I woke up Wednesday to a $14,705 loss.
I call that just another day The key is to not react emotionally, and don't let the price action tell you how to think about the investment.
But this sell-off was caused by a real piece of news. So I read the press releases and the investor presentation, listened to the investor update call, and did my own math. Here's my full breakdown.
📊 After the crash, HESM's yield hit the 100th percentile of the past 5 years. See it for yourself in the HESM Yield Analyzer (Pro).
The Key Story
Chevron Is Out of Hess Midstream
📊 Research HESM: DividendData.com/stocks/hesm
▶️ Watch the full analysis on YouTube: My Top Dividend Stock Just Crashed
Some people owned HESM for the sole reason that they thought Chevron would end up acquiring it. I was never in that camp. That wasn't a part of my investment thesis.
Instead, Chevron is out. And when I say out, I mean as an owner.
Chevron exits: Chevron is handing over all of its ownership, 78,276,485 units, and Hess Midstream cancels them. That leaves 127.9 million units outstanding, nearly 40% fewer.
What HESM pays: $200 million in cash, plus lower fees for Chevron from 2027 to 2033.
What HESM gets: Chevron's DJ Basin midstream assets in Colorado and a 20% stake in the Saddlehorn pipeline. HESM now owns 2 different regions of midstream assets.
Longer contracts: Both sides now have contracts through 2045, with a minimum revenue commitment of 80% through 2033 that can only go up.
Fully independent: No sponsor, a new independent board and a new company name to come. The deal is expected to close by year-end 2026.
So what was the market's verdict? They absolutely hated it. The stock went from $38.69 to $33.03.
The Numbers
A Smaller Company, Fewer Slices of the Pie
The headline here is that the company is getting smaller from fee cuts. But that economic value is now split up between fewer hands.
Adjusted EBITDA: From a $1,237.5M midpoint in 2026 guidance to a $900M midpoint for 2027, down 27.3%.
Adjusted free cash flow: From $922.5M to $575M, down 37.7%. Over the trailing 12 months, HESM had $694.4M of free cash flow.
Per unit: Adjusted EBITDA per unit goes from $6.00 to $7.04, up 17.2%. Free cash flow per unit is basically flat, $4.47 to $4.50.
Where the cash went: The fee cuts take an estimated $475M out of 2027 free cash flow. The DJ Basin and Saddlehorn add back about $200M.
What it really cost: They give up about $285M of free cash flow, but they no longer pay $253M of distributions to Chevron. So it really only cost them about $32M, plus the $200M cash payment.
If you were the management of Hess Midstream and you wanted to grow the business in the long run, this was a big win.
The Dividend
Distribution Growth Pauses in 2027
This company raised its distribution every single quarter, even through 2020 when many midstream stocks cut their payments. That combination of high yield and high dividend growth was one of my big reasons for owning it.
5-year growth: A 9.36% dividend CAGR, on a stock that was yielding 9.55% when I filmed.
The plan: One more increase in the fourth quarter of 2026, then hold that level through 2027. That's about $3.23 a unit in 2027, up from a $3.17 rate now.
Coverage: 2027 free cash flow covers the distribution 1.39x. That's a payout ratio of about 72%, and 79% at the low end of guidance.
Left over: $110M to $210M after the distribution, mostly going to pay down debt toward their long-term target of 3.5x to 3.75x EBITDA.
The risk: Leverage goes from about 3x, the lowest among public midstream stocks, to about 4.1x. Their credit facilities also mature in July 2027.
In my opinion, there still will be growth, because the business will be growing overall. They could get down to 3.7x leverage by 2029, and that's the base case for when dividend growth would start accelerating again.
If you're reinvesting like me, your income actually wouldn't end up being that different. With the lower price, you pick up more units over time.
Valuation
What HESM Is Worth Now
On the 2027 guidance, at $33.03, the business is trading at an even more attractive valuation.
Multiples: 8.81x EV to EBITDA and 7.35x price to free cash flow, a 13.6% free cash flow yield.
Distribution yield: 9.79%, counting the one more increase they said they're doing.
My intrinsic value estimates: $34.40 at 9x EV to EBITDA, $37.46 at a 12% free cash flow yield, $39.94 on a dividend discount model and $46.78 on a DCF through 2045.
HESM closed Friday at $32.26, and its forward yield is now 9.78%, the highest in 5 years.
Yes, the stock had a huge drop on the day. But I don't think the intrinsic value of the company really declined that much from this news, and you can make an argument that it went up.
My Plan
Why I'm Holding and Reinvesting
I'm not scared off by this drop. I do think the stock price could stay pretty low in this range for the coming months, with a lot of churning of the shareholder base.
Also rather unique: you don't get a K-1 for HESM. It shows up on your 1099-DIV.
My Plan: I'm not planning to do anything different. I'm going to keep holding my HESM and reinvesting my dividends. I'll get about $2,000 of dividends in November that I'll reinvest, and I hope the share price is still low then.
At a 9.55% yield, I'm getting more interested in adding. I wasn't thinking about it a couple weeks ago, but after this news, I'd be more likely to add and keep building my position, dollar cost averaging over time.
Earnings News
Huge Earnings This Week ($JPM, $JNJ, $BAC, $TSM, $ASML, $UNH, $WFC, $GS, $BLK)
Top Dividend Stocks: JPMorgan (JPM), JNJ, BAC, WFC, PNC, USB, BLK, FAST, PLD, TRV, etc.
Top Growth Stocks: Taiwan Semiconductor (TSM), ASML, IBKR, SCHW, GS, DPZ, etc.
Here's the full list to watch:
Tuesday (10/13):
Wednesday (10/14):
Thursday (10/15):
Friday (10/16):
Use our Earnings Calendar Tool: https://www.dividenddata.com/earnings-calendar?period=2026-10-12
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📅 Keep Investing. Stay informed.
Zach
Founder, Dividend Data
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Disclaimer: Dividend Data (Dividend Data LLC) is not a professional financial service. All materials released from Dividend Data (Dividend Data LLC) are for educational and entertainment purposes.