HI all who follow here:
I've attached my recent analysis and hopes regarding KMI and it's current status. I hope it fits with your view and encourage feed back, as it is now my largest holding:
KMI is a very solid dividend payer. It gets no respect, the result from a huge dividend cut, now many years back in time. They converted their MLP to a C-Corp back when their financing costs where prohibitive.
Since then they have done a good job of asset sales and debt reduction to below 4.0 ebitda to debt. That was a long time goal and they achieved it just this year end.
The CEO Kinder works for a Buck a year and takes his income via stock and the dividends that get paid on them.
Insiders have a huge position vs. the norm.
Before ENRON collapsed, Kinder took on a lot of debt and paid for the pipeline assets of ENRON as they attempted to become a trading exchange - that flopped.
KMI has just this last year redirected some of their new agreements to include a "pay as you go" fee for an agreed upon minimum fee that gets paid even if the allotted volumes are not utilized. If not utilized , they can sell capacity that exceeds 100%. THE NEW CLAUSE THAT THEY ARE WORKING INTO RENEWALS, is an additional fee that gets applied based on the value of the product being moved.
It really does not show up initially now in a big boost, as it is only on renewals and new customers - I doubt they get away with applying it to their partners on pipeline ownership like XOM.
That being said, as our natural gas and LNG exports become viewed as an export product based on a world price, vs. the island price that exists now because it is trapped in just the USA, it could be a huge long term wealth driver.
It marvels me that KMI's price has stayed below $20.00 for so long. In a world of litigious environmentalism deferring the build up of more pipelines, it seems to me that all of their legacy right of ways and easements should become of greater value. Especially when they are located in all of the Texas and Louisiana best gas and shale deposits.
Kinder has for the last 5 or 6 years indicated what they intend to do with the future dividend at year end quarter. Historically the new dividend goes into effect in Q2. It has been indicated to go from the current $1.11 to $1.13 annual dividend.
Last year, they expected dividend had been projected to become $1.20. So the last two years have been a less than expected increase.
With that in mind, the debt reduction level has been more than exceeded, which is a healthy achievement.
Kinder has some debt service that is upsized this year and the higher rates are biting them a bit, so they have underdelivered in the dividend increase aspect.
Actually that is conservative management and I like that!
Last but not least KMI has done a leadership role in ESG - especially the S in ESG. Last year they bought a new company that has expertise in renewable natural gas. The capturing of methane on large land fill projects. In the big scheme of things, it is chump change. BUT it allows a lot of getting ahead of the bad boy image that big oil has not done a good job on.
HOUSTON--(BUSINESS WIRE)-- Kinder Morgan, Inc. (NYSE: KMI) today announced it has agreed to acquire Indianapolis-based Kinetrex Energy from an affiliate of Parallel49 Equity. Kinetrex is the leading supplier of liquefied natural gas (LNG) in the Midwest and a rapidly growing player in producing and supplying renewable natural gas (RNG) under long-term contracts to transportation service providers.
Last but not least KMI has the largest carbon dioxide pipe line system in the country. It goes from the refineries in Houston and the ship channel area back to the shale fields to pressurized the gas field to yield more natural gas on older crude wells/fields. That became a break even event during the pandemic and is now coming back to be a profit center. KMI has experimented in advanced well rejuvenation techniques and when crude is priced like it is now, it remains unhedged and adds to the bottom line in a small way as well. This is an interesting development. I have a long time friend who is on the Board of Directors for Tetra Tech - a well water treating company. They have bought old low producing wells on the cheap, as it then becomes their obligation for well decommissioning expenses. The innovative techniques have developed such that the wells keep on producing and are not gushers but profitable at a normal price, lucrative at high prices.
Lastly XOM, CVX, PSX and KMI and their collective predominance in Houston refinery areas, may well turn carbon capture and sequestration into a profitable business now that the government is paying large carbon credits for the capture of carbon. Carbon that could well be a productive product to sell for well optimizations. Opportunistically KMI has their footprint all over that area and has the country's largest carbon pipeline complex in the country in all of the most productive shale deposit areas excepting dry gas in the Appalachian area. (too much NIMBY there).
I've been accumulating KMI for over seven years. They do increase the dividend each year and lately to a much smaller degree, but they do have their fingers in a lot of future potential events. Enough to keep them growing and with a potential to grow much faster than your typical utility like dividend paying company. IMO.
It is a good place to park cash and get a 6% plus dividend growth. I have used my future cash flow and dividend stream to sell far out in time puts on KMI, such that if assigned the the dividend yield on cost is in the 7.25% to 7.75%. I go out 9 to 12 months in 3 month increments. I usually never get stock assigned, unless I accumulate cash such that I sell an $18.00 put hoping to get it assigned. or just pay cash for shares if it dips below 17.30 ish like now.
My usual put sale is on a $16.00 put with a double down on a $15.00 put and triple down on a $13.00. I keep enough reserve cash such that if KMI gets depressed in a one off event, I'll load up and boost my dividend income.
I hope I'm not painting too rosy a picture here on you.<smile>
I'm now 70 and over the last 10 years have found good peace of mind in this kind of dividend investment and KMI has been good to me. It's not a double bagger by any means. IT IS AN INVESTMENT that yields slow but steady wealth growth. I believe there is always a place for that sector of investment style for everyone. The older I get, the more it appeals to me. After all its a double every 10 to 11 years. Lord willing I may have one more and maybe two more doubles out there.
One thing I'm sure of, natural gas is not going away in the next 10 years like Biden says. In the next 10 years it's price will go global via LNG exports and that may well make KMI another super energy delivery power house, with innovative methods of high grading their charging capabilities. Say what you like on renewables , but natural gas is the the single biggest driver that has enabled the USA to reduce their Carbon foot print like no one else on the Earth or in the Paris Agreement achieved. With intermittency of renewables now being better understood, and LNG ramping globally, KMI has a better than average and yet stable future growth potential. IMO
Better than average growth would be a nice plus and not beyond the realm of possibility.
Add a little frosting with government carbon credits and I'm thinking the dividend will grow nicely.
Hope that helps you in your study and thesis. |
