Tuesday, October 9, 2012

New Purchase - KMI

I bought 36 shares of Kinder Morgan, Inc. at $35.10.  This is my first investment in Kinder Morgan which has been a long time coming.  I decided to buy shares of the general partner instead of the limited partner for the higher dividend growth.  KMI intends to boosts dividends by 12% per year through 2015 which is obviously a very high rate.  This stock is currently paying about a 4% yield to boot. 

To be honest it's very difficult to value KMI.  I'm not exactly sure if I'm over paying or under paying.  What I do know is that I want to own a slice of this company, and I like the yield it's currently paying.  CEO and founder, Richard Kinder, owns about a quarter of all KMI shares.  His annual salary is $1 with no stock options or bonus incentives.  The reason he oversees the company is to make wise decisions that will increase his dividend stream and the value of his stake.  The guy is a multi-billionaire and knows what he's doing.  If it's good enough for Richard it's good enough for me!

In the past year Kinder Morgan acquired El Paso pipelines which I see as being beneficial to KMI.  So now we're looking at KMP, KMR, and EPB all paying incentive distribution rights to KMI.  Right now it looks like they need to finish asset drop downs, but I wouldn't be surprised if we see more acquisitions in the future.  According to the website, it's currently the third largest energy company in North America with total enterprise value greater than 100 billion.  I'm taking that to mean only XOM and CVX are bigger.  They operate 75,000 miles of pipeline throughout the US and Canada. 

I'll be on the lookout for opportunities to increase this position and I might add KMP as well.

16 comments:

  1. Awesome! As you know, I've been eyeing KMI from afar lately.

    Looks like you got in at a good price, thanks to the slight pullback today.

    When I saw your KMI purchase, I had a fantasy football moment for a second. Kind of like when you have your draft board all figured out, and the person who picks right before you takes the player you were looking at. Luckily with stocks, they issue out more than just 1 share ;)

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    1. Yeah KMI looks like a good one. I think many years from now I'll glad I made this decision. Haha there are many shares left for you to purchase, I didn't buy all of them!

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  2. Great buy! Who wouldn't want to own a "toll-road" like business? I've looked at KMI in the pass, but decided to pass up on the company since it didn't fit my preferences. Good luck with the investment, I'm sure it'll well 10 years from now!

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    1. I know you're not into energy companies and I can kind of see where you're coming from. It is my personal belief that the need for oil and natural gas isn't going to wane for a while. Now I don't know if energy companies will be great investments 50 years from now. I'm confident they will remain profitable for the 10-20 years. My plan is to load up on them now and collect part of the profits while business is booming. I'm up to 5 energy companies now and am totally ok with that!

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  3. Great buy! My internet was acting up yesterday so I didn't get to catch the pullback during trading. I have a limit order set for this morning and hopefully it'll reach my entry point.

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    1. Awesome. I'll check out your blog when I have a minute. Curious to see what you're buying!

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  4. Nice purchase! I've been watching KMI and I hope to initiate a position soon.

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    1. And I just so happened to buy some shares of KMI today. :)

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    2. Nice, join the party. I smell rising dividends...

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  5. Hi there! I'm a big fan of your website. I own quite a few of the same companies you do. I only purchase dividend growing companies and over the past few weeks after reading another bloggers website I started looking into TGH - Textainer Group Holdings. TGH has a low P/E ratio, low payout ratio about 40% and a great dividend of about 5.3%. It has had great dividend growth over the past 5 years and it has really sparked my interest. The funny thing is I never hear any bloggers or anyone for that matter talk about TGH. It gets no love and I'm not sure why??? U have any knowledge or thoughts on TGH that might be helpful????

    -Shawn

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    1. Hey what up Shawn?

      Unfortunately TGH is not a stock I track. It has come up a few times when I was doing screens. New ideas are always good. I'll take a look at that one, thanks!

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  6. KMP and KMR are the same company. The main difference between the 2 is how the distributions are paid, KMP cash, KMR stock. So you really only having 2 companies paying to KMI not 3.

    I owned it, KMI, for awhile but sold it a few months ago because I was worried about its debt levels. Once this yield chasing ends and the stock retreats back into the 20's I may get back in. I love those pipelines.

    Good luck to you.

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    1. Yes you are correct. However all 3 do pay IDRs to KMI even if it's indirectly with KMR. Man I wish I had the foresight to buy this one in the 20's. I waited a bit to see what would happen with the dividends, not a good plan :( I'm a little late to this party!

      Right now KMI is a tiny position for me at about 1.1% of my dividend portfolio and less than 1% of my total investment assets, but I do hope to add additional shares. If it goes back down to the 20's, I'm buying more! That would be awesome!

      Sounds like you've done well with KMI, good stuff.

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  7. CI,

    Great purchase here. Biggest company of its kind and it is essentially shielded from commodity prices, as they simply operate the terminals and pipelines that are used to transport the goods. An underground toll highway and the biggest player in town...what's not to like? The IDR, along with Richard Kinder's ownership stake, likely spell a very shareholder friendly holding for the long-term.

    Best wishes!

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    1. I've been looking at the various flavors of Kinder Morgan for quite a while, since 2010 I suppose. Your KMI purchase last month helped me get off my butt and join the Kinder retirement plan. Thank you for that

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