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KMI

Kinder Morgan NYSE:KMI Stock Report

Last Price

US$18.59

Market Cap

US$41.9b

7D

7.5%

1Y

7.5%

Updated

11 Aug, 2022

Data

Company Financials +
KMI fundamental analysis
Snowflake Score
Valuation2/6
Future Growth1/6
Past Performance4/6
Financial Health1/6
Dividends2/6

KMI Stock Overview

Kinder Morgan, Inc. operates as an energy infrastructure company in North America.

Kinder Morgan, Inc. Competitors

Price History & Performance

Summary of all time highs, changes and price drops for Kinder Morgan
Historical stock prices
Current Share PriceUS$18.59
52 Week HighUS$20.20
52 Week LowUS$15.01
Beta0.93
1 Month Change11.65%
3 Month Change-0.80%
1 Year Change7.46%
3 Year Change-6.49%
5 Year Change1.03%
Change since IPO-40.13%

Recent News & Updates

Jul 31

Kinder Morgan - 6% Yield But Don't Expect Gains

Kinder Morgan stock has a 6.2% yield. Its payout ratio is not unreasonable compared to other pipeline stocks. If you buy KMI for the dividend, you'll likely get to enjoy high dividends for the foreseeable future. However, this isn't the kind of stock that's likely to deliver huge capital gains. Kinder Morgan (KMI) is a well-known pipeline stock that sports a huge 6.2% dividend. Like most oil stocks, it has beaten the market this year, but its 10% gain is not as good as what E&Ps are delivering. This year, Exxon (XOM) is up 45%, and the Energy Sector Select SPDR Fund (XLE) is up 31%. Compared to those returns, KMI’s 10% gain isn’t impressive, though it does represent vast outperformance of the S&P 500. Other energy companies may not be the best comparison for KMI, as pipelines have a different business model from E&Ps. Pipelines “rent” their network to clients, who often pay for it even when they’re not using it. In this sense, their business model is similar to that of landlords, which is why many REIT investors like pipelines. Still, there is a correlation between pipelines and other energy stocks. Many people who hold E&Ps also hold midstream stocks. There’s a case to be made for holding both. Pipelines are less sensitive to oil prices than E&Ps are, so they can help lessen the volatility of an energy investor’s portfolio. If you’re interested in Kinder Morgan, you’re probably interested in the yield. Its stock isn’t known for huge price appreciation and Seeking Alpha Quant’s ‘D’ rating on growth doesn’t suggest that will change in the future. Past results don’t predict future results, but we’re talking 5.6% compound growth in free cash flow over 5 years, and negative growth in EBIT over the same period. This isn’t a growth stock by any standard, and therefore, the thesis largely revolves around how sustainable the dividend is. In this article, I will explore the sustainability of KMI’s dividend, concluding that it is basically safe. I’ll also explore some factors that point to tepid capital gains, even if oil stocks as a whole perform well. Ultimately, I conclude that the stock is a ‘hold.’ KMI’s Dividend as it Stands Today KMI is best known as a dividend stock with a very high yield. Therefore, it makes sense to analyze the stock in terms of the dividend, as the dividend is one of its main attractions. Kinder Morgan pays a dividend of approximately $0.28 per quarter. That works out to $1.12 per year. At Friday’s closing price, we get a forward yield of 6.22%. That looks nice on paper, but is the dividend sustainable? In a previous article, I covered Enbridge’s (ENB) dividend. Much like Kinder Morgan’s, its yield is very high: 6.18% on the date I wrote the article. However, I noted in my article on Enbridge that the stock’s payout ratio was a little high: 120% based on earnings, 69% based on cash flows. Kinder Morgan is in a similar boat. It has a 101% payout ratio if you go by earnings, but only 49% if you use cash from operations (“CFO”). KMI’s payout ratio is lower than ENB’s based on both earnings and operating cash flows. In fact, KMI’s CFO payout ratio is rather low for a pipeline, though its free cash flow (“FCF”) payout ratio is even higher than the earnings payout ratio. Why is KMI’s payout ratio so high when its operations produce more than enough cash to pay the dividend? It comes down to investments. Pipelines generally spend a lot of money on infrastructure upgrades, and Kinder Morgan is no exception. KMI had $3.06 billion in capital expenditures (“CAPEX”) in the last 12 months, which knocks the $5.045 billion in CFO down to $1.985 in unlevered FCF. Take out financing expenses and you’re down to $1.014 billion in levered FCF. To really know whether Kinder Morgan’s dividend is sustainable, we need to know what it’s spending so much money on. Sometimes, capital expenditures create new revenue streams and boost profits, other times, they’re just made because regulators require them. So, we need to construct a model for Kinder Morgan to see whether its dividend can be paid in the future. Q2 Earnings The first step in building a model for KMI is to look at its most recent earnings. The company released just last week, so we have some up-to-date information on how it's doing in 2022. In Q2, KMI delivered: $5.15 billion in revenue, up 63.5%. $1 billion in operating income, up from a loss. $653 million in net income, up from a loss. $1.176 billion in distributable cash flow, about $540 million greater than common share dividends paid. So, the quarter showed strong growth and a dividend that's sustainable based on cash flows. The trends look good, and the results beat on the top line. Having established that, we can move on to modelling the income statement. Income Statement Modelling Kinder Morgan’s income statement starts with revenue. There are two approaches we could take to this: top down and bottom up. Top down starts with macro factors (e.g. GDP growth) and works down to the company. Bottom up starts with company segments and moves up from there. Kinder Morgan’s businesses generally have long-term contracts, so it’s unlikely that its revenue will fluctuate much with GDP. Therefore, a bottom up approach is most suitable for this company. Here’s what we know about KMI’s segments: Nat gas pipelines have an average contract length of six years remaining. The terminals business has been known to sign 10-year contracts. A crude pipeline contract template on the company’s website is for 12 years. Recent CO2 contracts have a weighted average term of 16 years. It appears that KMI’s contracts are usually for 10 years or longer, so it’s safe to say the company’s revenue will be stable for the next 5 years. On top of that, there is always the possibility for growth by acquiring assets, raising tolls, or doing more volume. We should therefore model some positive growth in revenue. It wouldn’t be conservative to assume that the past year’s 22% growth will continue, but the five-year compound growth rate of 5.5% looks sensible. So, we’ll use that growth rate in our model. Next up, we have cost of goods sold (“COGS”). This tends to increase directly in proportion to revenue. According to GuruFocus, Kinder Morgan’s COGS-to-revenue ratio is 0.63. Rather than estimating a growth rate in COGS, I’ll use this ratio for each year in the model. Next, we have operating expenses. As the image below shows, this has been pretty much flat for the last five years. There is no specific reason to think that operating costs will rise with income like COGS does. So, in our model, we can assume this cost category stays fixed at $3.2 billion per year. KMI operating income (Seeking Alpha Quant)

Jul 24
Kinder Morgan (NYSE:KMI) Has Announced That It Will Be Increasing Its Dividend To $0.2775

Kinder Morgan (NYSE:KMI) Has Announced That It Will Be Increasing Its Dividend To $0.2775

Kinder Morgan, Inc. ( NYSE:KMI ) will increase its dividend from last year's comparable payment on the 15th of August...

Jul 23

3 Important Takeaways From Kinder Morgan's Q2 Results

KMI recently reported Q2 results. Overall, results were solid and the outlook is positive. We share 3 important takeaways from the report and earnings call. Kinder Morgan, Inc. (KMI) recently reported Q2 results. Overall, results were solid and the outlook for the company is positive. In this article, we share 3 important takeaways from the report and earnings call. #1. Inflation Is A Tailwind The first big takeaway from the earnings report was that inflation is largely a tailwind for the company. While this should not be surprising given that energy has proven to be arguably the best inflation hedge there is, KMI's structure as a midstream company means that it is largely immune to commodity price movements. As a result, it is encouraging to see that KMI is still able to benefit from inflation for the following reasons: (1) First and foremost, the little bit of commodity price exposure the company does have is helping them. This is largely reflected in the strong growth numbers that were reported during the quarter with distributable cash flow per share up 16% year-over-year, though some of this was also due to growth projects coming online. As a result, management increased its full-year guidance for EBITDA and DCF 5% higher. (2) They are managing inflationary headwinds quite well. As management stated on the earnings call: We’re facing some cost headwinds, mostly because of added work this year. While costs are up, we’re actually doing very well in holding back the impacts of inflation. It’s hard to measure precisely, but based on our analysis, we are well below the headline PPI numbers that you’re seeing. And actually, we appear to be experiencing less than half of those increases. That’s due to much good work by our procurement and operations teams, and much of this good performance is attributable to our culture. We are frugal with our investors’ money. (3) Their cash flows are largely indexed to inflation. As management stated on the earnings call when asked about inflation impacts on cash flows: we implemented the rate increase on July 1st of 8.7% across our assets. And based on where it’s tracking right now, I think that assuming PPI continues where it is and that we would implement the full thing, which is what we would expect, it’s somewhere in the neighborhood of 15% next year. This indicates that the best is likely yet to come concerning inflationary tailwinds to cash flows. #2. Growth Opportunities Are Abundant On top of inflationary and commodity price tailwinds for the business, KMI is still finding plenty of places to invest capital at very attractive risk-adjusted returns. With a balance sheet that is finally underleveraged based on their 4.5x long-term leverage ratio target after reducing net debt by $185 million year-to-date, management stated that they have "capacity to take advantage of opportunities." Management also highlighted that they have some "line of sight" for some growth acquisitions as well as organic growth investments in the near future that they plan to take advantage of. Richard Kinder clarified their conservative risk-averse approach to these investments, stating: we approved new capital projects only when we are assured that these projects will yield a return well in excess of our weighted cost of capital. Obviously, in the case of new pipeline projects, most of the return is normally based on long-term throughput contracts, which we are able to negotiate prior to the start of construction. But we also look at the long-term horizon, and we’re pretty conservative in assumptions on renewal contracts after expiration of the base term and on the terminal value of the investment. That said, we are finding good opportunities to grow our pipeline network as demonstrated by our recent announcement of the expansion of our Permian Highway Pipeline, which will enable additional natural gas to be transported out of the Permian Basin.

Shareholder Returns

KMIUS Oil and GasUS Market
7D7.5%8.4%1.3%
1Y7.5%54.7%-11.7%

Return vs Industry: KMI underperformed the US Oil and Gas industry which returned 49.9% over the past year.

Return vs Market: KMI exceeded the US Market which returned -11.6% over the past year.

Price Volatility

Is KMI's price volatile compared to industry and market?
KMI volatility
KMI Average Weekly Movement4.1%
Oil and Gas Industry Average Movement8.9%
Market Average Movement7.8%
10% most volatile stocks in US Market16.9%
10% least volatile stocks in US Market3.2%

Stable Share Price: KMI is less volatile than 75% of US stocks over the past 3 months, typically moving +/- 4% a week.

Volatility Over Time: KMI's weekly volatility (4%) has been stable over the past year.

About the Company

FoundedEmployeesCEOWebsite
193610,529Steve Keanhttps://www.kindermorgan.com

Kinder Morgan, Inc. operates as an energy infrastructure company in North America. The company operates through four segments: Natural Gas Pipelines, Products Pipelines, Terminals, and CO2. The Natural Gas Pipelines segment owns and operates interstate and intrastate natural gas pipeline, and underground storage systems; natural gas gathering systems and natural gas processing and treating facilities; natural gas liquids fractionation facilities and transportation systems; and liquefied natural gas liquefaction and storage facilities.

Kinder Morgan, Inc. Fundamentals Summary

How do Kinder Morgan's earnings and revenue compare to its market cap?
KMI fundamental statistics
Market CapUS$41.88b
Earnings (TTM)US$2.42b
Revenue (TTM)US$17.69b

17.3x

P/E Ratio

2.4x

P/S Ratio

Earnings & Revenue

Key profitability statistics from the latest earnings report
KMI income statement (TTM)
RevenueUS$17.69b
Cost of RevenueUS$10.65b
Gross ProfitUS$7.05b
Other ExpensesUS$4.63b
EarningsUS$2.42b

Last Reported Earnings

Jun 30, 2022

Next Earnings Date

n/a

Earnings per share (EPS)1.07
Gross Margin39.83%
Net Profit Margin13.68%
Debt/Equity Ratio100.2%

How did KMI perform over the long term?

See historical performance and comparison

Dividends

6.0%

Current Dividend Yield

103%

Payout Ratio