Tuesday, July 26, 2011

Kinder Morgan's High Dividend Yield

Investors are familiar with how great limited partnerships are as a source of dividend income. Companies like Kinder Morgan Energy Partners LP pays a high dividend. While investors may be familiar with this company, some investors may not be so familiar with the parent company. Energy infrastructure company Kinder Morgan Inc (KMI) is the parent company and general partner of Kinder Morgan Energy L.P. Kinder Morgan delivers fuel, natural gas, oil, and all forms of energy through its massive pipelines. Kinder Morgan has 37,000 pipelines and 180 terminals. The company’s operations are primarily based in North American with locations in both America and Canada.

Kinder Morgan is a very young company that has just been made newly available to common stockholders. Kinder Morgan just had an initial public offering this past February. The offering was well received as the stock was priced at $30 a share. This was well higher than the $26 price that the stock was expected to price at.

Kinder Morgan has a market cap of $20 billion dollars and trades at $27.50 per share. The stock trades at 26 times this year’s earnings and 2.8 times the projected earnings growth. Kinder Morgan has a massive debt burden of $15 billion dollars and only a few hundred million in cash. Fortunately, the company generates nearly $2 billion in cash flow. Investors are attracted to the company because of its high dividend.

The pipeline company is attractive to investors because it is already paying out a pretty reasonable dividend for a brand new stock. The stock has only been on the market for 6 months and has already increased its dividend substantially. The company increased its annual dividend payout from $1.16 per share to $1.20. The dividend increase has made the company one of the better dividend stocks in the industry. Kinder Morgan has a dividend yield of 4.3%. That yield is attractive to any investor in this market.


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1 comment:

  1. I think this is a good stock. However, I am curious as to why you think 87% of the float is short. Whats up w/that?

    ReplyDelete

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