Recent Buy – KMI

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A quick update on a recent purchase in my portfolio.

It has been hard to find bargains in this market environment. With the market flying high even in the event of horrible macro news, most stocks in most sectors are highly bid up. However, I did manage to find a decent valuation on one of the purchases I recently completed.

I added to my Kinder Morgan Inc (KMI) position with 200 shares @ $19.95. KMI currently yields 4% and this purchase adds $160.00 in annual dividends going forward.

Recent Buy Decision

  • Kinder Morgan Inc has finally cleaned up its books after the disastrous results & the 75% dividend cut in Dec 2015. Over the course of past 3 years, the stock has moved fairly sideways. However, in 2018, with the financials looking a lot stabler, dividends were raised by 60%.
  • Focus on building real assets in my portfolio with the pipeline infrastructure — as the US becomes a net O&G exporter.
  • Continued insider buying. Richard Kinder, the founder and chairman of KMI, has been buying a lot of shares lately. In a market where most insiders are selling to cash out, I like it when I see insiders buying more as they believe the stock is undervalued (& have more skin in the game). Current management ownership is ~14%.
  • KMI expects to generates $5B in DCF in 2019 and allocate $2B in dividends & $3B in other shareholder value enhancements (incl share repurchases).
  • Current expectation is to raise dividends by 25% in 2019 and 25% in 2020. A 25% raise (announcement expected in April 2019) will make this a 5% yielder at current price.
  • Following is a screenshot of KMI’s overall strategy going forward from the latest presentation.

Full Disclosure: Long KMI. Our full list of holdings is available here.

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