Kinder Morgan Energy Ptrs (KMP) 2013 Review

Kinder Morgan Energy Partners is the largest master limited partnership that owns and operates petroleum product pipelines in the US.  It owns 29,000 miles of pipelines and 180 terminals used in transporting gasoline, jet fuel, diesel fuel, natural gas liquids, coal and carbon dioxide.  This Master Limited Partnership has grown cash flow (the basis for dividend payments) and dividends at a 9-10% rate over the past 10 years earning approximately 20% return on partnership capital.  Future growth will come from:

(1) its focus on fee based and diversified businesses that allow the company to spread its risks and provide stable and steadily growing earnings stream,

(2) the growth in natural gas shale plays,

(3) KMP’s continued aggressive investment in new organic projects that will enhance the company’s long term growth prospects,

(4) an active acquisition program which in 2010 included seven terminals and 50% of Petrohawk Energy Corporation.

Negatives:

(1)    it is vulnerable to the volatility in crude oil and natural gas prices,

(2) it huge capital expenditure budget could impact the growth of distributions.

KMP is rated B+ by Value Line, carries a 58% debt to equity ratio, is expected to increase its dividend between 6-7% annually in the future which when combined with a 6.4% dividend yield, offers an attractive total return

      Statistical Summary

                 Stock      Dividend         Payout      # Increases 

                Yield      Growth Rate     Ratio*       Since 2003

KMP          6.4%         7%                 96%           10

Ind Ave      7.6             4                   79              NA

                Debt/                     EPS Down       Net        Value Line

              Equity         ROE      Since 2003      Margin       Rating

KMP         58%           23%           3                27%           B+

Ind Ave      58             14             NA              14             NA

*this ratio is the dividend to cash flow

     Chart

            Note: KMP stock made great progress off its March 2009 low, quickly surpassing the downtrend off its May 2008 high (red line) and the November 2008 trading high (green line).  Long term the stock is in an uptrend (straight blue lines).  Intermediate term, it is in an uptrend (purple lines).  The wiggly blue line is on balance volume.  The High Yield Portfolio owns a full position in KMP.  It is currently on the High Yield Buy List,  The lower boundary of its Sell Half Range is $119.

http://finance.yahoo.com/q?s=KMP

02/13