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.
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.
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!