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When analyzing the Kinder Morgan group of companies the question is not whether to invest but instead which of the four different choices make the most sense. While all of the Kinder Morgan publicly traded entities pay steady and growing dividends, there are differences that may make one choice more attractive than the others.

Overview

The Kinder Morgan companies have a total enterprise value - as of mid-January - of $105 billion, making the Kinder Morgan group one of the largest energy companies in the U.S. The company's major business is natural gas pipelines, where it owns the largest network in the country with 62,000 miles of pipe. The company - viewed in total - is also the largest transporter of petroleum products, largest transporter of CO2, and the largest independent terminal - both liquids and dry bulk - operator in the U.S. Kinder Morgan also has oil E&P operations in Texas and a pipeline serving the oil sands production in Canada. Investors have several different investment choices among the Kinder Morgan companies, so next up a quick overview of each.

Kinder Morgan Energy Partners

Kinder Morgan Energy Partners LP (NYSE:KMP) is a master limited partnership and the flagship company of the group. The current $32 billion market cap will soon be expanding out into the $40 billion range. KMP holds assets in all of the Kinder Morgan business groups with natural gas pipelines making up about 40% of the cash flow.

On January 29, Kinder Morgan Energy Partners announced an agreement to purchase Copano Energy, LLC (NASDAQ:CPNO) for approximately $5 billion. Copano Energy unit holders will receive 0.4563 KMP units for each CPNO unit. The deal is expected to close in the 2013 third quarter and will be immediately accretive to KMP unit holders.

KMP was formed in 1996 and has increased the annual dividend every year. For 2013, the company forecasts a distribution of $5.28 per unit, up 6% from the $4.98 paid in 2012. KMP has hit its dividend forecast 12 out of the last 13 years, missing by 2 cents in 2006, so you can pretty much bank the $5.28, which works out to 5.9% yield at the current unit price.

Kinder Morgan Management

Kinder Morgan Management, LLC (NYSE:KMR) is a $9 billion dollar company whose only asset is units of KMP and each KMR unit is backed by one KMP unit. Instead of cash distributions, KMR takes the KMP distributions and pays out additional KMR units. This accomplishes two purposes. First, KMR is not a K-1 company for tax purposes and secondly KMR functions like a dividend reinvestment plan as issued units earn their own distribution of more units.

El Paso Pipeline Partners

Kinder Morgan completed the purchase of El Paso Pipeline Partners LP (NYSE:EPB) in May of 2012. El Paso's E&P business was sold off, and some Kinder Morgan assets were dropped down to EPB and now the company is 100% into natural gas pipelines. EPB has a market cap of $9 billion. The company's assets are 89% interstate natural gas pipelines and the balance is LNG pipelines.

The 2013 forecast distribution for EPB of $2.55 per unit is a 13% bump up from the 2012 payout. Using the 2013 distribution and the current unit price, EPB has a yield of 6.2%.

Kinder Morgan Inc.

Kinder Morgan Inc. (NYSE:KMI) has a current market cap of $40 billion. KMI owns the general partnership interests of both KMR and EPB plus 13% of the KMP LP units, 10% of the KMR units and 42% of the EPB units. A significant amount of pipeline assets are also owned at the KMI level. The plan for 2013 is to drop down the majority of revenue producing assets down to KMP and EPB, turning Kinder Morgan, Inc. into more of a pure play MLP general partner company. As a corporation, KMI pay regular dividends.

The forecast 2013 dividend for KMI is $1.57 per share, up 12% from the $1.40 paid in 2012. The forward yield at the current share price is 4.3%.

Growth Projections

Kinder Morgan has a very tight management system and has provided multi-year forecasts and has a history of meeting or exceeding those forecasts. At the January analyst conference the company put out the following annual distribution growth projections through 2015. The expected rates of growth are KMP: 7%, EPB: 9%, and KMI: 12%. After 2015, the projections are at slightly lower rates for the next 5 years, with grow in the 5-6% range for the MLPs and about 10% for KMI. Growth will be fueled by a combination of acquisitions and organic expansions to the current network. Currently $12 billion of projects are in the pipeline for the next 5 years. Projections do not include the Copano acquisition, which should be immediately accretive once the deal closes.

The important point concerning the growth for Kinder Morgan is that the projects are just extensions to the existing network. The company does not have to go start from scratch on new projects to grow the business. The growth can be much more organic with almost guaranteed accretion to cash flow for any capital product the company undertakes.

Conclusions

Of the different investment choices in the Kinder Morgan lineup I am most intrigued by Kinder Morgan Inc. The continued move towards becoming a pure play MLP GP company in a corporate form should lead to outstanding dividend growth and starting from a 4% current yield, I think the long-term total return will be the best of the bunch.

The two MLPs - KMP and EPB - are and will be excellent MLP investments. Investors who already own units will not be disappointed with future results. El Paso Pipeline Partners unit holders should be especially pleased with the Kinder Morgan management of the company. The KMR choice provides a unique option to get what is essentially a dividend reinvestment plan for KMP without the K-1 tax issues.

I do not think that the K-1 distribution reporting from MLP companies is a reason to stay away from the group, but when, as is the case of Kinder Morgan, the better investment choices come without the extra tax work a K-1 brings, it is a win-win for investors.

Source: Kinder Morgan Companies Projecting Strong Dividend Growth In 2013