The natural gas pipeline giant is an income-producing machine.
Investors interested in Kinder Morgan (KMI 1.13%) should make a note of April 30. It's an important date for those interested in receiving the natural gas giant's lucrative dividend.
Here's a closer look at why that date matters for dividend investors and what the longer-term future holds for the pipeline stock and its high-yielding dividend.
Payday is coming
Kinder Morgan recently declared its latest dividend. The natural gas infrastructure company will make its next quarterly dividend payment of $0.2875 per share on May 15. However, investors interested in receiving that dividend must be shareholders of record by market close on April 30. You don't need to do a thing if you already own shares; you'll automatically receive its next payment. On the other hand, if you've been considering investing in Kinder Morgan to start earning dividend income, you'd need to buy shares by the end of this month to receive its next payment. Otherwise, you won't see your first dividend payment until next quarter.
The company's upcoming dividend payment is noteworthy. Kinder Morgan recently increased its payout to an annualized rate of $1.15 per share, up about 2% from last year's rate. That's its seventh straight year of increasing the payment. With the stock recently trading at around $19 per share, Kinder Morgan's dividend yield is above 6%. That's significantly higher than the S&P 500 index's current yield of 1.4%. Put another way, every $1,000 invested into Kinder Morgan stock would generate more than $60 of annual dividend income, compared to around $14 for an S&P 500 index fund.
While you'd need to buy Kinder Morgan stock by the end of this month to receive its upcoming dividend, you don't need to rush out and buy shares if you're not ready. The company makes dividend payments every quarter, so there will be plenty more to come.
Plenty of fuel to keep paying dividends
Kinder Morgan should have no problem continuing to pay dividends. It generates very stable cash flow. Roughly 68% of its cash flow is from take-or-pay contracts or hedging agreements, meaning Kinder Morgan gets paid the full rate regardless of market conditions. Meanwhile, long-term, fee-based contracts back the bulk of its remaining cash flow. While they have some volume sensitivity, they limit its exposure to commodity price volatility. Those features drive Kinder Morgan's view that it will generate about $5 billion, or $2.62 per share, of distributable cash flow this year, up about 8% from last year.
With its dividend payment set at $1.15 per share, Kinder Morgan has a very conservative dividend payout ratio of around 51%. That will enable it to retain roughly half of its stable cash flow to fund expansion projects and maintain its strong balance sheet. The company expects to end the year with a 3.9 times leverage ratio, putting it toward the lower end of its 3.5x to 4.5x target range. That low leverage ratio gives Kinder Morgan the flexibility to opportunistically repurchase shares or make an acquisition.
The company also has a growing backlog of high-return expansion projects to grow its cash flow in the coming years. Kinder Morgan ended the first quarter with $3.3 billion of projects that should enter service over the next few years, a net $300 million increase from the end of last year. Meanwhile, the company sees plenty of expansion opportunities still ahead, fueled by growing demand for natural gas from catalysts like LNG and AI. It also has ample financial flexibility to continue making needle-moving acquisitions, like last year's $1.8 billion deal for STX Midstream. The company's growth-focused investments will increase its cash flow, giving it more fuel to continue raising its dividend payments.
An income stock for the long haul
Kinder Morgan will make its next dividend payment in May. While that means investors will need to own shares by the end of this month to collect that payment, there's really no rush. Kinder Morgan's stable cash flow, strong financial profile, and visible growth prospects suggest it should have the fuel to continue paying dividends for years to come. That makes it a great stock to buy for those seeking a long-term income stream.
Matt DiLallo has positions in Kinder Morgan. The Motley Fool has positions in and recommends Kinder Morgan. The Motley Fool has a disclosure policy.
FAQs
If you are considering investing in the midstream sector, Kinder Morgan (KMI 0.60%) will probably be one of the standouts. With a nearly $40 billion market cap and a geographically diverse business, it is an industry leader. Add in a 6.3% dividend yield, and there's a lot to like here.
Is Kinder Morgan a good dividend stock? ›
Breaking Down Kinder Morgan Inc's Dividend Yield and Growth
Over the past three years, Kinder Morgan Inc's annual dividend growth rate was 2.70%. Extended to a five-year horizon, this rate increased to 8.00% per year. And over the past decade, Kinder Morgan Inc's annual dividends per share growth rate stands at -2.70%.
How to invest in Kinder Morgan? ›
Kinder Morgan does not offer a direct investment program and KMI must be bought through a broker or through our transfer agent Computershare.
Who owns Kinder Morgan? ›
What is the prediction for KMI? ›
Based on short-term price targets offered by 16 analysts, the average price target for Kinder Morgan comes to $20.38. The forecasts range from a low of $17.00 to a high of $23.00. The average price target represents an increase of 7.21% from the last closing price of $19.01.
What is the 5 year forecast for KMI stock? ›
Based on our forecasts, a long-term increase is expected, the "KMI" stock price prognosis for 2029-05-02 is 19.626 USD. With a 5-year investment, the revenue is expected to be around +5.46%. Your current $100 investment may be up to $105.46 in 2029. Get It Now!
Is KMI a good long-term investment? ›
But if when you choose to buy stocks, some of them will be below average performers. Over the last year the Kinder Morgan, Inc. (NYSE:KMI) share price is up 12%, but that's less than the broader market return. Having said that, the longer term returns aren't so impressive, with stock gaining just 3.9% in three years.
Is KMI a good long-term stock? ›
KMI Stock 12 Month Forecast
Based on 11 Wall Street analysts offering 12 month price targets for Kinder Morgan in the last 3 months. The average price target is $20.00 with a high forecast of $22.00 and a low forecast of $17.00. The average price target represents a 11.30% change from the last price of $17.97.
What are the three dividend stocks to buy and hold forever? ›
Thanks to their market-leading positions and blockbuster drugs, stocks like Novo Nordisk (NYSE: NVO), Eli Lilly (NYSE: LLY), and AbbVie (NYSE: ABBV) are potential dividend goldmines. Here is what you need to know about these three stocks and their ability to pay dividends for decades to come.
How is KMI dividend taxed? ›
Kinder Morgan, Inc.'s dividends paid in 2022 are return of capital for U.S. tax purposes. Based on information available at the time of this posting, distributions made during 2022 are non-dividend distributions and treated as a return of capital.
Kinder Morgan, Inc. ( KMI ) pays dividends on a quarterly basis.
How much debt does Kinder Morgan stock have? ›
As you can see below, Kinder Morgan had US$32.4b of debt, at December 2023, which is about the same as the year before. You can click the chart for greater detail. And it doesn't have much cash, so its net debt is about the same.
Who are the largest shareholders of KMI? ›
Largest shareholders include Vanguard Group Inc, BlackRock Inc., State Street Corp, Bank Of America Corp /de/, VTSMX - Vanguard Total Stock Market Index Fund Investor Shares, VFINX - Vanguard 500 Index Fund Investor Shares, XLE - The Energy Select Sector SPDR Fund, Geode Capital Management, Llc, Jpmorgan Chase & Co, ...
Why is Kinder Morgan stock going down? ›
While Kinder Morgan hasn't reported its full-year results yet, it warned in its third-quarter earnings report, "We expect to finish 2023 slightly below our plan on a full-year basis." The culprits were "lower than expected commodity prices, delayed RNG projects and higher pipeline integrity expense."
Who are Kinder Morgan's customers? ›
The company also provides natural gas treating services through its gas and condensate treating plants across the U.S. Its key customers include energy producers and shippers, major oil companies, local distributors, and businesses across various industries.
Is Kinder Morgan a safe stock? ›
The financial health and growth prospects of KMI, demonstrate its potential to perform inline with the market. It currently has a Growth Score of B. Recent price changes and earnings estimate revisions indicate this would be a good stock for momentum investors with a Momentum Score of B.
What is the stock market forecast for KMI in 2024? ›
According to our current KMI stock forecast, the value of Kinder Morgan shares will rise by 2.77% and reach $ 19.42 per share by May 15, 2024. Per our technical indicators, the current sentiment is Bullish while the Fear & Greed Index is showing 39 (Fear).
Is Kinder Morgan a good job? ›
Kinder Morgan has an overall rating of 3.8 out of 5, based on over 980 reviews left anonymously by employees. 77% of employees would recommend working at Kinder Morgan to a friend and 67% have a positive outlook for the business. This rating has improved by 2% over the last 12 months.
