8 shares KMI, 5.21% yield, $13.12 annual income (purchased today)
I wasn't planning to purchase additional KMI stock for a while because I don't want my position getting too large, but I felt the market was offering a nice opportunity today.
To be honest, I get a somewhat unsettling feeling with KMI. It happens to be a fairly difficult business to understand, it is prone to bear attacks, and it's tough to actually value the shares. These aren't the sort of traits I usually look for in a long term holding. Kinder Morgan Inc. doesn't have a whole lot of historical data in which to make a comparison since it began trading on public exchanges during 2011. Because of that (and other factors) I had to rely solely on the Dividend Discount Model for share valuation. Normally I would not trust any single valuation technique enough for exclusive use...
All that being said, it is hard to top KMI's income producing capabilities. What we have here is a high yield stock expected to grow dividends in the high single digits. Kinder Morgan management told us in advance they will be raising dividends by 8% this year. A 5% yield growing 8% is a recipe for success I simply cannot over look. KMI has very nice assets, a plan to expand rapidly, is big enough to absorb competitors via future acquisitions, has a CEO I very much admire, and a stock price trading 20% below my DDM fair value calculation. KMI is a bet on the American energy boom. KMI is a bet on natural gas. The CEO has his personal fortune tied to the company and I believe he is the right man to make it all work. It's hard to find this combination of yield and dividend growth anywhere else.
While KMI is by no means a dividend champion and has a bit more risk than I typically accept, ultimately I think this investment will be a good one.
I have many free trades available and did not pay commissions today (or with last week's FRIP purchase). I plan to continue small weekly purchases until my supply of free trades run out.
Core Position: No
Speculative Position: No*
Expectations: Steady income; 5% annual dividend growth
Automatic Sell: Frozen dividend; dividend cut
Consider Selling: Rich Kinder retires, business fundamentally changes, management becomes untrustworthy, fundamentals deteriorate, wildly over valued stock price, or position fails to meet expectations