Kinder Morgan Boosts Quarterly Dividend Distribution 25% (KMI)
By: Ned Piplovic,
After breaking a streak of consecutive annual dividend hikes in 2016, Kinder Morgan, Inc. (NYSE:KMI) has hiked its quarterly dividend distribution in both of the last two years.
After increasing its total annual dividend distribution almost 120% from 2011 to 2016, Kinder Morgan encountered some headwinds and cut its quarterly dividend payout amount 75% from $0.51 at the end of 2016 to $0.125 for the first-quarter 2017. However, after delivering a flat quarterly dividend distribution of $0.125 for nine consecutive quarters, the company restarted its dividend hikes and has doubled the dividend payout in just two years.
In addition to dividend growth, Kinder Morgan’s share price has been also recovering from a 70% drop in 2015, which should make the stock attractive to investors seeking capital gains, as well as income investors. Just over the trailing 12 months, the share price advanced more than 20% to complement the above-average dividend yield for substantial total returns.
However, as always, interested investors should conduct their own equity analysis to ensure that Kinder Morgan’s stock is a good fit for their investment portfolio strategy. The investors that find the stock attractive and a good fit should act promptly to ensure full benefits of the current dividend hike. All investors that can claim stock ownership before the upcoming ex-dividend date on April 29, 2019, will be eligible to receive the next round of quarterly dividend distribution payouts. Kinder Morgan will distribute its next dividend on the May 15, 2019, pay date.
Kinder Morgan, Inc. (NYSE:KMI)
Headquartered in Houston, Texas, and founded in 1936, Kinder Morgan, Inc. operates as an energy infrastructure company in North America through four business segments. The Natural Gas Pipelines segment owns and operates natural gas pipeline and storage systems, as well as natural gas processing and treating facilities. Additionally, this segment also operates natural gas and crude oil gathering systems, as well as natural gas liquids (NGL) fractionation facilities and transportation systems. The Products Pipelines segment owns and operates refined petroleum products, NGL, crude oil and oil condensate pipelines, associated product terminals and petroleum pipeline transmix facilities. The Terminals segment owns and operates terminals that transload and store refined petroleum products, crude oil, ethanol and other chemicals. Furthermore, this segment also owns and operates storage and transload terminals for bulk products, such as coke, metals and ores. Lastly, the CO2 segment produces, transports and markets carbon dioxide generated from recovery and production crude oil from mature oil fields. This segment also owns interests in oil fields, gas processing plants and a crude oil pipeline system in West Texas. The company infrastructure network comprises more than 150 terminals and approximately 84,000 miles of pipelines.
Kinder Morgan boosted its quarterly dividend distribution 25% from $0.20 in the previous period to the current $0.25 payout amount. This new quarterly dividend amount corresponds to a $1.00 annualized payout and is equivalent to a 5% forward dividend yield. The current dividend yield is more than 12% higher than Kinder Morgan’s own 4.4% dividend yield average over the past five years.
Kinder Morgan’s current yield outperformed the 2.25% average yield of the overall Basic Materials sector by more than 120%. While the advantage is not as drastic, Kinder Morgan’s current dividend yield is also 9.5% higher than the 4.54% simple average yield of the company’s peers in the Oil & Gas Pipelines industry segment.
Furthermore, only 17 of Kinder Morgan’s peers in the S&P 500 index currently offer their shareholders dividend yields of more than 5%. Therefore, Kinder Morgan’s current yield places the company in the top 4% of S&P 500 companies by dividend yield.
Prior to the quarterly dividend distribution cut in the first quarter of 2017, Kinder Morgan rewarded its shareholders with 16 consecutive quarters of rising dividend payouts at an average quarterly growth rate of 3.2%. Furthermore, even after a steep dividend cut, Kinder Morgan resumed dividend hikes after just two years of flat dividend payouts. The company doubled its annual payout amount in just the last two years, which corresponds to an average annual growth rate of more than 40%. Additionally, Kinder Morgan plans to continue its dividend growth and plans another 25% quarterly dividend hike in 2020.
Despite relatively strong dividend payouts, the dividend income distributions were not able to compensate for a share price decline of 40% over the past five years. However, the dividend income payouts managed to reduce total losses to 28% over the five-year period. However, combined with positive share price gains, the rising dividend distributions delivered a total return of nearly 16% over the past three years. Short-term gains were even higher. The share price gain of more than 20% and a 5% dividend yield combined to reward Kinder Morgan’s shareholders with a total return of more than 26% over the last 12 months.
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