Kinder Morgan Energy Ptrs (KMP) 2014 Update

Kinder Morgan Energy Partners is the US largest master limited partnership.  It owns and operates petroleum product pipelines in the US.  It owns 54,000 miles of pipelines and 180 terminals used in transporting gasoline, jet fuel, diesel fuel, natural gas liquids, coal and carbon dioxide.  This Master Limited Partnership has grown cash flow (the basis for dividend payments) and dividends at an 8-10% rate over the past 10 years earning approximately 15-20% return on partnership capital.  Future growth will come from:

(1) its focus on fee based and diversified businesses that allow the company to spread its risks and provide stable and steadily growing earnings stream,

(2) the growth in natural gas shale plays,

(3) KMP’s continued aggressive investment in new organic projects that will enhance the company’s long term growth prospects,

(4) an active acquisition program [latest---Tennessee Gas Pipeline, El Paso Natural Gas].

Negatives:

(1)    it is vulnerable to the volatility in crude oil and natural gas prices,

(2) it huge capital expenditure budget could impact the growth of distributions.

KMP is rated B+ by Value Line, carries a 51% debt to equity ratio, is expected to increase its dividend between 6-7% annually in the future which when combined with a 6.8% dividend yield, offers an attractive total return

      Statistical Summary

                 Stock      Dividend         Payout      # Increases 

                Yield      Growth Rate     Ratio*       Since 2004

KMP          6.8%         7%                 92%           10

Ind Ave      6.2             7                   78              NA

                Debt/                     EPS Down       Net        Value Line

              Equity         ROE      Since 2004      Margin       Rating

KMP         51%           17%           3                21%           B+

Ind Ave     52              16             NA              15             NA

*this ratio is the dividend to cash flow

     Chart

            KMP stock made great initial progress off its March 2003 low, quickly surpassing the downtrend off its May 2008 high (straight red line) and the November 2008 trading high (green line).  KMP stock broke below its long term uptrend in early 2013 and also traded below the lower boundary of its Buy Value Range.  In the latter case, it was Removed from the High Yield Portfolio’s Buy List.  It is currently trading in an intermediate term trading range, though the stock got whacked hard yesterday as a result of a negative article in Barron’s.  The critical price at the moment is the Stop Loss Price which is $70.  As long as KMP remains above this level, the High Yield Portfolio will continue to Hold it.  A trade below that level will result in the elimination of this position.

  

  

http://finance.yahoo.com/q?s=KMP

02/14