Natural gas investments should continue to increase, partly due to demand because they are cheaper than other resources and already have the infrastructure to harvest them. Because of these factors, natural gas dividend investors may later find themselves in a good position.
If you’re ready to hop on the natural gas investment train, you might consider Kinder Morgan (NYSE:KMI). Let’s take a look at the reasons and reasons against investing in the company, what you need to know before investing and how to make your final decision.
About Kinder Morgan
In 1997, a group of investors, Executive Chairman Richard D. Kinder and Vice President William V. Morgan, started Kinder Morgan Energy Partners. In 1999, the company acquired KN Energy, an integrated natural gas pipeline company, which was the second publicly traded company owned by Kinder Morgan.
in 2001, Kinder Morgan Management LLC (NYSE:KMR)The third publicly traded Kinder Morgan Company was formed to manage ownership of KMP Equity. Kinder Morgan bought TeraSense Inc in 2005 for approximately $5.6 billion.
In 2011, the company again began trading on the New York Stock Exchange and its IPO issued approximately 110 million shares, raising approximately $3.3 billion. The company later acquired El Paso Corporation in 2012, officially making it one of the largest energy companies and natural gas network operators in North America. In 2013, Kinder Morgan acquired Copano Energy.
In 2014, Kinder Morgan acquired Kinder Morgan Energy Partners, Kinder Morgan Management LLC and all public shares of El Paso Corporation in a $76 billion deal.
Now, Kinder Morgan Inc., based in Houston, operates as an energy infrastructure company and operates four segments. The Natural Gas Pipeline segment operates interstate and interstate natural gas pipelines and underground storage systems, natural gas storage systems, and natural gas processing and treatment facilities. It also handles natural gas liquids separation facilities and transportation systems and liquefied natural gas liquefaction and storage facilities. Kinder Morgan’s product pipeline segment operates refined petroleum products, crude oil and condensate pipelines, associated product terminals and petroleum pipeline transmix facilities. The terminal section owns tankers and also operates liquids and bulk terminals that store gasoline, diesel fuel, chemicals, ethanol, metals and petroleum coke. The carbon dioxide (C02) segment produces and transports CO2 and recovers and produces crude oil from mature oil fields.
Reasons to Consider Kinder Morgan Inc. Stock
Let’s take a look at some of the reasons why you might consider investing in Kinder Morgan:
- Balance sheet: Kinder Morgan reported $5.15 billion in revenue, 63.5% higher than the $3.15 billion reported a year ago and beat analysts’ expectations. Stronger-than-expected commodity prices and its segment results helped drive a positive turnaround in the balance sheet.
- Cash Flow Generation: Cash flow strengthened in Q2, with distributable cash flow at $1,176 million compared to $1,025 million. Share buybacks also bodes well for the company. Due to its positive results, the company repurchased 16 million shares. Cash and cash equivalents fell from $1.1 billion during the same quarter in 2021 to $100 million during Q2. Despite this cash flow reduction, it should not hurt the company’s strong position.
- Dividend Capacity: Kinder Morgan shows a strong dividend and evidence of good growth potential. With a dividend yield of 6.24%, an annual dividend of $1.11, and a five-year dividend growth track record, Kinder Morgan has the potential to continue to drive its dividend growth.
- Expansion: As one of the largest energy infrastructure companies in North America with 83,000 miles of pipelines and 141 terminals, the company continues to expand and invest in its infrastructure. For example, its Gulf Coast expansion will add another 570 mmcf and will also add additional capacity to terminals and product pipelines should the demand be met.
Kinder Morgan Inc. Reasons to clear stock
Why do you want to go in a different direction when you invest? let’s take a look.
- High Dividend Yield: You may be concerned about Kinder Morgan’s high dividend yield. If a company may not have enough income to cover its dividend payments in the future, it is a potential risk. This year, Kinder Morgan expects to distribute about $2.5 billion to investors, which is a roughly 53% dividend payout ratio. However, it is important to note that for a company with cash flow and capacity, this is a constant ratio. In addition, the company’s expansion projects should help it grow further.
- BBB Loan Rating: As interest rates rise, higher debt levels increase risk, and Kinder Morgan has a BBB-level loan rating. Its debt to market value of equity is 79% and the debt balance is $33.3 billion. This can put dividend investments at risk and the high debt-to-equity ratio also puts pressure on the company as a whole.
Should You Consider Kinder Morgan Inc.?
Is a relative unknown entity compared to Kinder Morgan Inc. Dividend Aristocrats either Dividend Kings stock. However, if you are looking for a solid company in the energy sector that transports natural gas, gasoline, crude oil, CO2 and more, Kinder Morgan Inc. You can have a definite answer.
Stock buybacks, recent increased guidance, and positive fundamentals can help you determine whether a company’s returns can continue to outperform similar peers in the same niche. You may also want to consider positioning this type of company within the broader range of energy investments. The future may not be good for entirely non-renewable-resources companies.
However, it’s a good idea to consider if you want to buy Kinder Morgan as part of a diversified portfolio. consider whether you want Stay away from your dividend investment Or prefer to reinvest your dividends, for example. If you want to cash out in retirement or continue to live off your dividends, it can affect the way you invest.