Kinder Morgan Inc. (NYSE:KMI) had mostly an in line quarter for Q2. The company saw its cash available for dividends increase 14% to $332 million, or $0.32 per share. Do note that this includes an income tax payment of $273 million. In addition, Kinder Morgan rewarded its shareholders with yet another dividend increase to $0.43, up a penny from last quarter and 8% from last year. This was pretty much exactly what I predicted in a recent article. YTD, the dividend payout ratio is about 98%.
Kinder Morgan saw robust growth in its equity income coming from its MLPs Kinder Morgan Energy Partners (NYSE:KMP) and El Paso Pipeline Partners (NYSE:EPB). For KMP, payments were up 11%, almost 90% of which came from the IDRs. For EPB, total payments were up 10%, almost evenly split between distributions from its LP interest (KMI owns over 40% of EPB) and IDRs. In total, equity income was up 10.9%.
Notably, Kinder Morgan slowed down the pace of share buybacks to almost nothing, which I also anticipated due to the rise in its share price. However, funds were deployed to buy back some warrants, 19 million in total for $43 million. In addition, Kinder Morgan furthered its efforts into becoming a pure-play GP, divesting to EPB nearly a billion worth of midstream assets. I expect this trend to continue in future quarters. Using a dividend discount model, Kinder Morgan's FV is north of $45 per share, implying a 20% upside from current prices.
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