Update: Kinder Morgan Increases Dividend

| About: Kinder Morgan, (KMI)

Summary

Kinder Morgan recently released full-year 2014 earnings results.

The company declared a $0.45 quarterly dividend, exceeding its 2014 annual budgeted payout amount of $1.72 by two cents.

Kinder Morgan also reaffirmed its expectation to pay out $2 per share for 2015.

After the close on January 21st, Kinder Morgan (NYSE:KMI) reported fourth-quarter and full-year earnings results. Here's a look at how 2014 compared to 2013:

2014

2013

% Change

Revenue ($b)

$16.2

$14.1

14.9%

Distributable Cash Flow ($b)

$2.62

$1.71

52.8%

Distributable Cash Flow / Share

$2.00

$1.65

21.2%

Dividend / Share

$1.74

$1.60

8.7%

Shares Outstanding (-b)

1312.0

1040.0

26.2%

Note that this comparison is somewhat skewed in light of the recent consolidation. However, the underlying Kinder Morgan thesis largely remains. The board of directors approved a $0.45 quarterly dividend - 9.8% higher than the previous year's mark - payable on February 17th. Cash dividends of $1.74 for 2014 come in two cents higher than the annual budget of $1.72. Furthermore, the company reconfirmed its expectation to declare dividends in the amount of $2 per share for 2015.

Chairman and CEO Richard Kinder said that "KMI had a good year," despite commodity pricing headwinds. He reminded investors that the company's "large diversified portfolio of mostly fee-based assets can produce good results even in tumultuous market conditions." Segment earnings, coming in at $7.5 billion, were higher due in large part to natural gas pipelines.

On December 3rd of 2014, Kinder Morgan provided preliminary projections of $2 per share in dividends and $500 million in excess dividend coverage during 2015. Today, KMI reiterated the dividend amount and suggested that the excess coverage might be closer to $650 million. The company estimated that for every $1 per barrel change in average WTI crude price, distributable cash flow could be impacted by approximately $10 million in light of the mostly fee-based model.

In a previous article, I detailed that an 11.5% annual anticipated total return might be a reasonable baseline expectation. At that time, the "current" yield was about 4.3%, with the expectation of a 4.9% yield on cost once the $2 dividend was paid. Today, with the $0.45 quarterly dividend, shares are trading with a similar "current" yield, along with an expected yield closer to 4.8%. Future returns depend upon both execution and the future dividend yield, but it appears that Kinder Morgan remains a reasonable dividend growth investment. In any event, the company continues to live up to its promises of matching or exceeding its budgeted dividend amount, as demonstrated by today's announcement.

Disclosure: The author is long KMI.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

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