Kinder Morgan Increases Dividend By 2.43%, But Is It A Buy?

Apr.24.14 | About: Kinder Morgan, (KMI)


The stock seems to be nearing a top in price right now.

The stock is fairly valued based on next year's earnings estimate.

The financial efficiency ratios have increased since December.

The last time I wrote about Kinder Morgan, Inc. (NYSE:KMI) I stated, "…I will not be adding new positions in KMI because I think I can add more to KMI at a cheaper price." Since the time the article was published the stock has dropped 5.35% versus the 2.29% gain the S&P 500 (NYSEARCA:SPY) posted. Kinder Morgan owns and manages a diversified portfolio of energy transportation and storage assets. The company through KMP operates or owns an interest in approximately 37,000 miles of pipelines and approximately 180 terminals. Keep in mind this article is about KMI, and not Kinder Morgan the MLP (NYSE:KMP).

On April 16, 2014, the company reported fourth-quarter earnings of $0.28 per share, which missed the consensus of analysts' estimates by $0.05. In the past year the company's stock is down 13.53% excluding dividends (down 9.18% including dividends), and is losing to the S&P 500, which has gained 20.57% in the same time frame. With all this in mind, I'd like to take a moment to evaluate the stock on a fundamental, financial and technical basis to see if it's worth buying more shares of the company right now.


The company currently trades at a trailing 12-month P/E ratio of 29.23, which is fairly priced, but I mainly like to purchase a stock based on where the company is going in the future as opposed to what it has done in the past. On that note, the 1-year forward-looking P/E ratio of 22.53 is currently fairly priced for the future in terms of the right here, right now. The 1-year PEG ratio (3.64), which measures the ratio of the price you're currently paying for the trailing 12-month earnings on the stock while dividing it by the earnings growth of the company for a specified amount of time (I like looking at a 1-year horizon), tells me that the company is expensively priced based on a 1-year EPS growth rate of 8.04%. Below is a comparison table of the fundamentals metrics for the company for when I wrote all articles pertaining to the company.

Article Date

Price ($)


Fwd P/E

EPS Next YR ($)

Target Price ($)


EPS next YR (%)

















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On a financial basis, the things I look for are the dividend payouts, return on assets, equity and investment. The company pays a dividend of 4.88% with a payout ratio of 143% of trailing 12-month earnings while sporting return on assets, equity and investment values of 2%, 11.2% and 6.6%, respectively, which are all respectable values. Because I believe the market may get a bit choppy here and would like a safety play, I believe the 4.88% yield of this company is good enough for me to take shelter in for the time being. Below is a comparison table of the financial metrics for the company for when I wrote all articles pertaining to the company.

Article Date

Yield (%)

Payout TTM (%)

ROA (%)

ROE (%)

ROI (%)













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Looking first at the relative strength index chart [RSI] at the top, I see the stock bouncing off of oversold territory back on 13Mar14 and approaching overbought territory with a current value of 60.35. I will look at the moving average convergence-divergence [MACD] chart next. I see that the black line is above the red line with the divergence bars flattening in height, indicating bearish momentum is starting. As for the stock price itself ($33.61), I'm looking at the 200-day simple moving average (currently (34.63) to act as resistance and $33.12 to act as support for a risk/reward ratio which plays out to be -1.46% to 3.03%.

Recent News

  1. The company declared a 2.43% increase to the dividend. The $0.42 quarterly dividend will have an ex-date of 28Apr14 and pay date of 16May14 with a forward yield of 5.04%.
  2. The company reported earnings which missed estimates on the afternoon of 16Apr14. First quarter earnings were $0.28 per share on $4.04 billion in revenue versus estimates of $0.33 per share and $3.87 billion.


The oil boom continues in the United States along with gas and Kinder Morgan is at the forefront of liquefied natural gas exports. Fundamentally the company is fairly priced based on future earnings estimates but expensively priced based on next year's earnings growth potential. Financially, the efficiency ratios have increased from the last time I wrote about the company and the dividend has increased. On a technical basis I believe the stock may be topping out here in the short term. Due to the toppy technicals, expensive valuation based on next year's earnings growth potential, and miss on earnings per share I will not be pulling the trigger here right now.

Disclaimer: This article is meant to serve as a journal for myself as to the rationale of why I bought/sold this stock when I look back on it in the future. These are only my personal opinions and you should do your own homework. Only you are responsible for what you trade and happy investing!

Disclosure: I am long KMI, SPY. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.