The Bull Market ended in late July. We have been in an extremely choppy, sideways trend ever since.
We are now ever so close to entering into an official Bear Market. In fact, on Tuesday we were in Bear Market territory, intraday. A miracle ninth inning market rally, much like the one that the Tampa Bay Rays staged to oust the BOSOX, saved the market from closing below that crucial 1,100 level.
I have also been writing about a few stocks that continue to hold up well even in this very bad economy, and in this now, poor market environment.
I would like to focus on one stock that has not only provided a very nice combination of Income and Growth (the best of both worlds), but has also held up fairly well during the 2008 bear market.
Kinder Morgan Energy Lp (NYSE:KMP) is a MLP engaged in the ownership and management of energy transportation and storage assets primarily in the U.S.
Let's first look at a current five year chart of Kinder Morgan Energy Lp:
As you can see, the stock has done very well over the last five years, and is holding up reasonably well during the approximate 17% sell-off that we have seen in the market over the last eight weeks.
Why is the stock doing so well?
Let's first begin with the performance of the stock. Here is a snapshot that shows very plainly how well the stock has peformed vs. the S&P 500:
Data from Best Stocks Now App
As you can see, the stock has soundly beat the S&P 500 over the last 1, 3, 5, and 10 years. The stock was down 9.2% in the year 2008, but the S&P 500 was down 38.5% that year.
In additon to this, the stock still sports a very attractive dividend yield of 6.8%. Compare this with CD rates and the U.S. ten year treasury right now! It is also important to note that the stock has delivered an average total return of 13.7% per year over the last ten years.
This total return shows that the stock has delivered the best of both worlds, income and growth.
What about the fundamentals, however? Past performance is nice, but investing is all about the future. How safe is that dividend? Can the company continue to grow? Let's next look at Kinder Morgan's dividend history.
|4-Sep-01||2: 1 Stock Split|
|2-Oct-97||2: 1 Stock Split|
As you can see, Kinder Morgan paid out $4.33 per share in dividends in 2010. They are on track to pay about $4.60 or more in dividends this year. By contrast, they paid $3.07 per share back in 2005, $1.60 in 2000, and about $0.62 in 1995.
The company has delivered phenomenal dividend growth over the last fifteen years. During that time, they have never missed or decreased their dividend. During this same period of time the stock price has gone from approximately $2.00 per share (adjusted for dividends) to today's price of just over $68 per share.
Now let's look at Analyst's expectations:
|Revenue Est||Current Qtr. |
|Next Qtr. |
|Current Year |
|Next Year |
|No. of Analysts||8||7||10||9|
|Year Ago Sales||2.06B||1.93B||8.08B||8.81B|
|Sales Growth (year/est)||12.40%||25.70%||9.00%||13.30%|
According to the analyst's that follow the stock, the company is expected to grow its earnings by 25.9% this year and 29.2% next year. In addition to this, the company is expected to grow its earnings by 11.3% per year over the next five years.
Given Kinder Morgan's long track record of dividend growth, it prospects for coming quarters, and over the next five years, I feel fairly comfortable that I will continue to receive my dividends and continue to see dividend growth in the stock.
Kinder Morgan Partners is one of the best examples of income and growth that I can find in the market at the current time.
Disclosure: I am long KMP.