Kinder Morgan: A Dividend Opportunity Worth ConsideringLarge Caps 0 replies 0 likes 0 votes 147 views
Have you heard of Kinder Morgan Inc. (KMI)? They're making waves in the energy sector, and I think they could be a great addition to your portfolio.
Now, I know renewable energy is all the rage these days, but let's not forget about the importance of natural gas and oil. Despite the push for renewables, these traditional energy sources are still expected to play a significant role in our energy mix for years to come. That's where KMI comes in. They offer a strong dividend yield of 6.63%, and they're projected to have a whopping $4.8 billion in distributable cash flows in 2023. That's no small sum!
What sets KMI apart is their unwavering commitment to their shareholders. Over the past six years, they have consistently increased their dividend, putting their investors first. And let me tell you, finding a company like KMI with such a strong yield and a solid support system is a rare gem. It's like hitting the jackpot, but without all the bells and whistles.
While some tech companies have been stealing the spotlight with their soaring stock prices, value companies like KMI have taken a bit of a dip. But fear not! This presents a golden opportunity to snatch up quality shares at a reasonable price. In fact, KMI plans to increase its dividend by at least 2% in 2023 compared to the previous year. That's the kind of dedication to shareholders that makes my investor senses tingle.
KMI has positioned itself as one of the largest energy midstream companies in North America. They hold a staggering 15% of the natural gas storage capacity in the US. That's quite an achievement, and it has helped them become the dividend giant they are today. Sure, there's been a lot of talk about renewable energy and the challenges it poses, but let's be real—it will take a long time before we can say goodbye to natural gas and oil completely.
What makes KMI an attractive investment option is its ability to maintain strong margins even during challenging times. They're expected to generate solid free cash flow margins of 8.63% in the current climate. Sure, there might be a slight dip in distributable cash flows for 2023 due to some declines in the natural gas market, but prices are expected to rebound in 2024. That bodes well for KMI's financial health and future success.
Now, let's take a quick peek at their recent quarterly report. While the top line showed a slight decrease, KMI still managed to grow its earnings per share by 3% year over year. Considering the fluctuations in natural gas prices, a 10% decrease in revenues isn't all that bad. They're navigating the challenges surrounding natural gas pipelines in the country with finesse. In fact, their existing pipeline systems are becoming even more valuable as the debate over new pipelines continues.
Looking ahead, KMI has committed $3.7 billion to growth capital projects. Around 53% of these projects are expected to be in service in 2023, with the rest rolling out in 2024 and beyond. It's worth noting that the majority of this investment is going towards natural gas, indicating KMI's confidence in the sector's growth potential. They're scaling back their annual growth spending a bit compared to historical levels, but they still believe in the long-term prospects of the industry.
Sure, the transition to renewables is happening, but it'll take time. Renewable energy currently accounts for only 12% of the global energy mix, and that number is growing alongside natural gas. So, it's safe to say that KMI is positioning itself for
success by balancing their investments in both sectors.
Now, let's talk finances. KMI has been doing an impressive job of strengthening their balance sheet. Their long-term debts have decreased significantly, dropping from a high of $42 billion in 2015 to under $30 billion now. That's the kind of progress that investors love to see. KMI's management team is prioritizing a healthy balance sheet that won't jeopardize their ability to pay dividends and engage in buybacks. It's a win-win situation for everyone involved.
Of course, it's important to keep an eye on KMI's debt levels. Their cash has seen a slight decline, but they continue to generate strong EBITDA, even in a softer market. For 2023, they're projecting $7.7 billion in EBITDA, resulting in a net debt/EBITDA ratio of 3.7. It's a bit higher than some investors might prefer, but I'm optimistic that KMI will continue to reduce their debt and strengthen their financial position.
In conclusion, Kinder Morgan Inc. is a major player in the natural gas industry, with a solid 15% share of the US natural gas storage capacity. They face some challenges due to ongoing discussions in Congress, but these hurdles only make their existing assets more valuable. With a projected FCF distributable to shareholders and a reliable dividend yield of over 6%, KMI is definitely worth considering.
The management team's commitment to shareholders and the overall quality of the business make KMI a buy in my book. So, if you're looking to diversify your portfolio and capitalize on the long-term potential of natural gas and oil, KMI could be the perfect addition. Keep an eye on their upcoming Q2 report for more insights into their performance. Who knows, with a bullish uptrend in commodities, the share price could climb back toward the $19 mark.