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Kinder Morgan: Buy This High-Yield Dividend Stock Now

Apr. 07, 2021 12:32 PM ETKinder Morgan, Inc. (KMI)112 Comments
The Asian Investor profile picture
The Asian Investor


  • Kinder Morgan is an important energy company with great strategic value and a long-term growth path in the vital natural gas industry.
  • Kinder Morgan budgets $4.4b in cash flow in FY 2021, which supports its dividend and 6.3% yield.
  • KMI is in a bullish setup and has a low valuation based on the P-B ratio.

Pumped-storage power station with three pipelines
Photo by ZU_09/E+ via Getty Images

Would you want to invest in one of the largest energy infrastructure companies in the US with contracted cash flows, a strong long-term growth picture, good coverage and a 6.3% yield? I would! Kinder Morgan (

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The Asian Investor profile picture
I look for high-risk, high-reward situations. Five largest portfolio holdings: Bitcoin, SoFi, Alibaba, PayPal, Western Alliance. Early buyer of cryptocurrencies. I live in Thailand :)

Analyst’s Disclosure: I am/we are long KMI. 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.

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Comments (112)

crrj profile picture
record market highs----RECORDS-----KMI is a fossil and needs to beg some private equity group to pay $19 now and be done...
@crrj yes, they transport, store, etc fossils derivatives & do quite well at it. Next.
I read this AM that the Army Corps of Engineers announced that it will allow the Dakota Access Pipeline to continue operations until March, 2022. I find it hard to believe that they issued this announcement without White House approval. Maybe the Biden crowd is wising up re fossil fuels, hence, things may be looking up for pipelines. We'll see.
@Flave Simple corrupt logic - they fed the lefty masses with the Keystone kill. They will pocket Dakota for next feeding time - anyway the mobs are moving for more tasty targets, such as, Supreme Court control (packing). I seen this movie before - different venue.
@jupenya Venezuela?
@cardinal933 Before that one - in fact I was in Venezuela before (& after) the regression started (98) mentioned the “movie” to no avail - naïveté is a human condition.
I got kindred as well! Took that symbol down. I am overweight epd now
@sadye EPD is a wonderful SWAN, especially if one was smart enough to buy it 3-4 points ago.
crrj profile picture
How do KMI assets compare to the valuations paid by Buffet and others on recent pipeline acquisitions?
I have need slow adding positions on this for the lsst two year. I was able to average down to $13 because of pandemic. Also add other oil stocks during pandemic
With regard to ENB pipeline political problems in Minnesota and Michigan, the MN line 3 is currently under construction and scheduled for completion this year. One down, one to go
bill h illify profile picture
These pipeline companies ran way to hot back in 2015 or so ...then they were hit...now is the time to accumulate these assets...
DAHABES profile picture
I was Kindered and not happy about it but stuck with it. While I'm still well under water, if I sold now I would need to find something to replace it at 6+% divy which is a tall order. Gas will be around for a long time so the existing pipelines are money.
By the way I expect Kmi to have done very well in the Texas freeze out because they own so much Texas pipe.,they were critical in keeping the power grid operational.
houtex profile picture
They had some volume issues across their system during the event, though I guess they could have made up for it elsewhere. I wouldn’t be surprised if the event was a negative hit to earnings. Having kept my power and heat I personally am thankful to them and everyone else who worked to keep the lights on and I feel terribly for the people who were less fortunate.
Remember they control some storage fields and I expect they traded around their assets at record gas prices. So I think we see a nice surprise for first quarter earnings
houtex profile picture
That’s fair. I guess we’ll see in a few weeks.
arson profile picture
I'm never going back to anything that trades under the ticker KMI. Everyone saying how great the yield is hasn't owned this very long.
@arson You have to get past being Kindered. Great dividends and Kinder Sr. needs to retire soon. Cant build more pipelines, etc. Nat gas taking over from coal at power plants.
@arson - dude - that was years ago. Get over her.
The Asian Investor profile picture
@arson I am sorry to hear that ... have you considered averaging down? The dividend is growing again ...
I know 2014 is old news, but this entire article could have been written nearly the same in 2013. Take or pay contracts, solid dividend, growth and dependence on fossil fuels, all was true back then and it all proved not to matter when it came to returns.
Uh except throw in a once in a lifetime oil crash from $100 to negative numbers and a world wide pandemic.
@deviruchi - you too. Get over her. And the price was rather higher. And the situation completely different. We are past the pandemic, not going into it.
I’ve never owned KMI, but long several Pipelines including MMP, ENB, EPD and a small residual position in ET. At a lower price I would buy KMI based on its natural gas component and the fact it is a C-corp v MLP... I’ve never been Kindered, but I have certainly been ET-ed! Nonetheless, I believe natural gas has a long way to run.
EPD ,MMP and others are far better... Never get kindered...
08 Apr. 2021
When is a dividend not a dividend? When it is a distribution disguised as a dividend. Be aware.

Yeah i noticed its dividend is not taxable, so its a distribution, a distribution of what? Equity. Explain thanks
@sky4it2012 Its a non-taxable return of (your own) capital. It reduces your tax basis in your KMI stock. Your brokerage statements should automatically reflect your reduced cost basis, thus no separate record keeping burden on your part.
@HaroldL it's a bit more complicated than that I think.

A corporation’s quarterly distribution of cash is characterized as a taxable dividend (qualified dividend) to the extent it comes out of the corporation’s earnings and profits (“E&P”). Any part of the distribution that exceeds E&P is treated as a non-taxable return of capital (non-dividend distribution) which reduces the shareholder’s basis in the stock. If the return of capital exceeds the stock basis, the excess is treated as a capital gain. KMI has published that at least its first dividend is entirely "qualified" and not a return of capital.
Even though I was "Kindered," and sold out as a result, KMI would be tempting to me here were it not for the fact that I'm already significantly overweight midstreams as it is.

Retired income investor
Here are all the favorite answers to all your favorite questions. Same stuff over and over:

O Kmi announced dividend to go to $1.08
O Kmi announced that cap growth will be between $1.0b and $1.5 b a year for next 3-5 years. At 15% returns that adds $150mm in dcf a year
O kinder was the asset guy at Enron. He left in 1996. Enron went belly up in 2001. Read smartest guys in the room or pipe dreams. He had little to do with the fiasco
O enough with the divy cut. That was 5 years ago. Invest in the future not the past. In 2008 apple was nearing bankruptcy and look at it now.
O even if Kmi never built another asset tge stock price could grow if they rebought the stock with all excess cash flow. That excess cash flow if you add back future cap ex is $2.0b a year. That equates to buying back 125mm shares a year or 5% of the shares outstanding. It would only take 4-5 years to drive the stock to a double.

Epd and Kmi are the companies to invest in this space. I sold enb and reallocated to these two.
The Asian Investor profile picture
@Texasthumper Interesting points, thank you very much.
@Texasthumper I bot a small position in KMI recently. Thinking of adding but afraid of being kindered. I own ENB and have no plans for selling. ENB is a great company. I just stopped dripping and now am taking the cash [in my IRA].
I choose to get out of enb because all the issues they are having on cross border pipelines as well as a lot of assets in oil. I favor nat gas. At 6% yield I believe Kmi is safer with a little room to run.
How do you write a story on KM I and never mention the more than 75% dividend cut
@jimoc It's expected that KMI will announce an increase to their dividend this quarter. They cut it in the past to pay down debt, which Wall Street wanted all of the pipeline companies and MLPs to do.
@jimoc That's old, old news.
The Asian Investor profile picture
@jimoc Are you sure I have not mentioned the dividend cut from 2015? :)
Sold the stock in the 30s. Started back buying at $11. Very pleased with my return and my dividend. Some folks enjoy dancing on the Titanic. I hopped off and sold this and every MLP I owned several years ago. Kinder cut the dividend to save the company. During the financial crisis half the stocks I owned reduced or eliminated their dividend including JPMorgan. So KMI is in good company..
The Asian Investor profile picture
@Bbhead You have been either were lucky or very clever :)
@The Asian Investor The whole MLP space began to stink like week old fish. I owned a half dozen of them. So I cleaned out the fridge. After the market hit the March 2020 lows all of them became buys. I just bought KMI and figured it would return to the price it was trading at that January ($20). Still hasn’t got there..
SirVirtual profile picture
Buy? No - I'm still underwater from a previous purchase. Fool me once...
@SirVirtual so why are you holding it if you think there are better options out there? If you are holding it, you are essentially buying it.
The Asian Investor profile picture
@SirVirtual How about averaging down? The shares pay a 6.3% yield ...
I like buying pipers that don't cut their dividends
The Asian Investor profile picture
@ziggyzig You are right. The dividend has been cut, but has also been growing in the last years.
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