Kinder Morgan, Inc. (NYSE:KMI) stock is about to trade ex-dividend in four days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Thus, you can purchase Kinder Morgan's shares before the 30th of January in order to receive the dividend, which the company will pay on the 15th of February.
The company's next dividend payment will be US$0.28 per share, on the back of last year when the company paid a total of US$1.11 to shareholders. Based on the last year's worth of payments, Kinder Morgan stock has a trailing yield of around 6.0% on the current share price of $18.57. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether Kinder Morgan can afford its dividend, and if the dividend could grow.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Kinder Morgan paid out 98% of its earnings, which is more than we're comfortable with, unless there are mitigating circumstances.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see Kinder Morgan has grown its earnings rapidly, up 158% a year for the past five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Kinder Morgan's dividend payments per share have declined at 1.4% per year on average over the past 10 years, which is uninspiring.
To Sum It Up
Has Kinder Morgan got what it takes to maintain its dividend payments? We're not enthused to see Kinder Morgan's dividend was not well covered by earnings over the last year, although it is great to see earnings growing. We think this is a pretty attractive combination, and would be interested in investigating Kinder Morgan more closely.
In light of that, while Kinder Morgan has an appealing dividend, it's worth knowing the risks involved with this stock. Every company has risks, and we've spotted 2 warning signs for Kinder Morgan (of which 1 can't be ignored!) you should know about.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
What are the risks and opportunities for Kinder Morgan?
Earnings are forecast to grow 3.2% per year
Earnings have grown 28.6% per year over the past 5 years
Interest payments are not well covered by earnings
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.