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Kinder Morgan Energy Partners (NYSE:KMP) is one of the best energy MLPs in the market. The partnership has a yield of about 6.61% -- however, the price movement for the partnership has been largely negative. KMP is down 3.35% during the past twelve months. A fall of about 10% during the past six months has eaten up the rise during the first six months of the year. Since the financial meltdown of 2008, investors have been investing more in high-yield securities, which has made master limited partnerships an attractive pick. As a result, KMP has gained about 50% since 2008. However, the increased interest from investors was not solely due to the high-yield of MLPs - KMP has been growing its portfolio quite impressively over the years. At the moment, it is one of the biggest energy MLPs in the market with one of the most valuable portfolio of assets.

Consistent Impressive Increase in Distributions

The table below shows the annual distributions to all the unit holders and general partners.

(click to enlarge)

Per unit cash distributions have been increasing for the partnership over the past three years as shown by the table above. KMP does not make cash distributions to Kinder Morgan Management (NYSE:KMR), instead, the partnership issues i-units to KMR - the number of i-units being issued to KMR depend on the cash distributions made to the common unit holders. Over the past three years we have seen an annual increase of about 4.5% in cash distributions to the common unit holders. Kinder Morgan Inc (NYSE:KMI) is the general partner of the partnership and receives incentive distribution from KMP. Distributions to general partner have been increasing at a higher rate than the common unit holders. However, on more than one occasions, KMI has waived some of its incentive amounts in order to fund some acquisitions.

The table below shows the most recent cash distributions and a trend in quarterly distributions.

(click to enlarge)

The trend in quarterly distributions is the same as the annual distributions and the partnership is continuing to reward its unit-holders by increasing cash distributions.

Is It the Right Time to Buy?

I believe so. I think the market has been a little too harsh and panicked. The partnership is doing very well in terms of cash generation ($1.75 billion in operating cash flows for the first two quarters compared to $1.4 billion for the same period last year). KMP has delivered 25% average annual returns since 1997. The stock is down considerably due to the negative sentiment and panic in the market. However, I expect the stock to make a recovery soon as the estimates for the earnings are encouraging and it is expected that the partnership will beat the earnings estimates. Furthermore, technical indicators are also showing that the stock has entered "oversold territory", and it is bound to make a recovery soon.

Conclusion

KMP is an ideal investment for income hunters due to its healthy yield (6.6%) and stable growth in the stock price. I believe the growth in cash distributions will continue as the partnership is able to increase the cash flows and increasing demand for energy will enable the partnership to continue growing its cash flows. Furthermore, Richard Kinder decided to increase his holding as the stock price went down, which shows that the management has belief in the future prospects of the partnership. KMP has been one of the best run MLPs and its general partner has helped the partnership grow substantially. As I mentioned above, KMI has received reduced incentive payment due to the need of cash for acquisitions by KMP.

Source: Kinder Morgan Energy Partners: Juicy Yield, Limited Upside