I am submitting the following article on Kinder Morgan to Seeking Alpha. As always, The Dividend Hunter subscribers get first look anytime I write about one of our newsletter portfolio stocks.
Rich Kinder: “The Kinder Morgan Game Plan is Still on Track”
Last year, Kinder Morgan made lots of news that kept investors guessing about the company’s prospects. The Kinder group went from four different publicly traded entities to one, simplifying the business structure and allowing Kinder Morgan to finance a more robust, longer term growth plan. With its 2015 first quarter earnings release Kinder Morgan showed that the company remains on its stated path of generating a very attractive dividend growth investment through at least 2020.
With the roll up (that was completed in the November 2014) of the two MLPs it operated into a single corporate entity, Kinder Morgan became one of the largest energy companies in the U.S. Currently KMI has a market cap of $95 billion. For the most part, KMI is a different kind of energy company providing the infrastructure assets that allow oil and natural gas to move from the production fields to the end users. With its size there are many parts to the Kinder Morgan enterprise as shown in this chart:
Six Year Growth Plan
With the roll up, Kinder Morgan presented a business plan with a forecast of $2.00 per share in dividends to be paid for 2015 (up 16% from 2014) and in the following years 10% annual dividend growth through 2020. The company will use the MLP growth model of developing and acquiring infrastructure assets to build an increasing revenue and distributable cash flow stream. The energy price environment has changed since last fall, and one item I was looking for out of the first quarter earnings report and call was a reiteration of the growth guidance. During the conference call Q&A, Chairman and CEO Richard D. Kinder made the following statement, which for me says it all:
“Notwithstanding this tremendous drop in commodity prices, the Kinder Morgan growth game plan is still on track.”
Dividend Increase and Yield Expectations
With the first quarter earnings, Kinder raised its quarterly dividend by 7% to $0.48 per share. The dividend will be paid on May 15 to shareholders as of April 30. With $0.48 paid for the past quarter, investors can expect to receive at least $1.52 more over the next three dividend payments. The $2.00 annual dividend rate puts the current yield at 4.5%.Ten percent annual dividend growth maths out to $3.20 in dividends per share for 2020. That’s a 7.25% yield on the current share price.
At the current time, owning Kinder Morgan seems to be a no-brainer. Hard to beat a 4.5% yield and 10% or better dividend growth. As long as the company keeps growing the dividend, has excess cash flow coverage in relation to the dividend, this is a buy, add, hold and see you in 2020 stock.
Be sure to check out the February issue with the full write-up on Kinder Morgan. Click here for direct access.