Stock Purchase: Kinder Morgan (KMI)

We are one week into August and I’ve been busy making several purchases in my Dividend Retirement portfolio.  In this post I will highlight the first of these purchases.

I recently posted my August screening results / buy list and I have since narrowed my focus down to a handful of stocks.  These stocks are KMI, ADM, SO and CMI from my original list and I’ve added DIS and UPS to my buy list recently.

The massive sell off that Kinder Morgan has experienced since the end of April has pushed the KMI dividend yield up to around 6% – a number I just couldn’t ignore.  So earlier this week I pulled the trigger on KMI, adding 75 shares to my portfolio.

 

Company Overview:

Kinder Morgan, Inc. operates as a holding company. It owns and operates pipelines and terminals that transport natural gas, gasoline, crude oil, carbon dioxide and other products and stores petroleum products, chemicals and handle bulk materials like ethanol, coal, petroleum coke and steel. The company operates through six segments: Natural Gas Pipelines, Products Pipelines, CO2, Terminals, Kinder Morgan Canada and Other. Source – TradeKing.

 

My main reason for purchasing Kinder Morgan is it’s enormous economic moat.  KMI’s natural gas and refined products pipelines are incredibly difficult to replicate and they generate a ton of cash flow.  Plus there is still plenty of room to grow as KMI is investing heavily in new pipes that are backed by long-term fixed contracts.

After the recent consolidation of it’s former limited partnerships, KMI has claimed the ability to pay out dividends of $2 per share in 2015.  They also said that they are on track to reach this goal in their recent quarterly report.

KMI has paid out just $1.42 over the first 3 quarters implying that a hefty dividend raise is coming next quarter in order to reach the $2 mark.  In addition, KMI says that they will be able to raise their dividend by 10% annually through 2020.  This would result in a massive annual payment of $3.22 per share at the end of that period.

KMI Dividend History and Predictions

Dashed bars are predictions based on company statements

 

As I mentioned at the top of this post, the KMI dividend yield has reached 6% recently due to the dramatic drop in share price over the last few months and some recent dividend increases.  This represents a new high in dividend yield (data shown through August 3rd, 2015):

 

Considering KMI’s wide moat, commitment to their dividend, the current dividend yield and the company’s growth prospects, I believe KMI is a great addition to my portfolio at this time.

 

Kinder Morgan (KMI) Purchase Details

  • Sector: Energy
  • Industry: Oil & Gas Storage & Transportation
  • Purchase date: 8/3/2015
  • Portfolio: Dividend Retirement Portfolio
  • Shares purchased: 75
  • Cost per share: $34.01
  • Commissions: $14.95
  • Cost basis: $2565.69
  • Yield on cost: 5.73%
  • Forward income: $147

These 75 shares of KMI add $147 of forward income to my portfolio, bringing the total up to $2155.96.

My Dividend Retirement portfolio has been updated to reflect my new stake in KMI.

 

What are you thoughts on KMI?  Please let me know in the comments section below!

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12 Responses

  1. Great purchase DE! You are thinking like myself. I just purchased 200 additional shares of KMI. Keep up the great work and stay in touch my friend.
    LOMD

    • Dividend Empire Dividend Empire says:

      That’s awesome LOMD! That position is gonna bring in a ton of cash for you. I think this is one I will keep on adding to over the years.

      Take care,

      Ken

  2. JM says:

    Agree with your purchase!!

    Next Tuesday, my Sharebuilder investments will be in KMI,XOM and COP.
    I am going to dollar cost average into the oil stocks over the next few months (maybe years lol!!)

    As long as they don’t cut their dividends, I am a buyer!!

    • Dividend Empire Dividend Empire says:

      That’s a great plan JM. I’m seriously considering COP as well but perhaps I should take a break from energy for a while.

      I wish I could dollar cost average into these positions but the commissions in my retirement account are outrageous. At $14.95 per trade I must invest at least $1500 at a time to meet my 1% of trade rule for commissions. Oh well, I’ll be happy to buy more in a few months if prices keep falling.

      Thanks for stopping by and enjoy your new oil stocks next week!

      Ken

  3. Hi Ken,

    Good call with KMI. I also bought before the selloff into the 32s. Either way, one certainly can’t complain about a 5.73% yield.

    Have a good weekend unpacking 😉

    Blake

    • Dividend Empire Dividend Empire says:

      Thanks Blake! I’m actually taking a break from unpacking this weekend. Heading down to Anaheim with my boy to his first Angels game. Have a great weekend!

      Ken

  4. Div4son says:

    I like the purchase. Is this in your taxable or no taxable account?
    D4s

    • Dividend Empire Dividend Empire says:

      Thanks D4s. This is actually in my tax deferred 401k account. I know it’s not ideal but I just didn’t have the funds to make this purchase in my taxable account and I was really itching to buy this stock.

      Take care,

      Ken

  5. We did not buy as many shares, but we also picked up a few shares of KMI recently for our family’s dividend stocks portfolio. I really like KMI at the current levels. We originally bought KMI around this price and saw it go up above $40 and now back down to the low 30s. Great stock with attractive dividends. Let’s hope it continues!

    Best wishes and continued success! AFFJ

    • Dividend Empire Dividend Empire says:

      Awesome! It looks like a lot of people are picking up KMI at this price. Gotta love the company’s goal to increase their dividend 10% annually through 2020. Best wishes to you as well.

      Ken

  6. Grant Willey says:

    Received KMI’s dividends this week and I’m still smiling! Such a strong company and strong future. Much happiness to all my fellow KMI holders!

    • Dividend Empire Dividend Empire says:

      I bet you are still smiling! KMI has an extremely attractive dividend and it looks like it will get even better over the next few years. Enjoy your KMI paycheck!

      Ken

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