pleased ever since. However, I do not understand how we are able to support such a high PE and it keeps me from adding to my position. Can someone please give brief explanation of why we can support this PE in the future. Know about news announced yesterday that is accretive to earnings. From what I've read a large part of tjhe revenues coming from EP will go to KMI.
Let me reiterate Lisa's recommendation that you read a primer about MLP's. Let me also amplify her comment about pipeline depreciation. KMP and most other MLP's do whatever they can to minimize taxable income while maximizing free cash flow. As MLP's typically have large capital investments, they generally have large amounts of depreciation, which is a non-cash charge against income. That is why earnings, i.e., taxable income, is such a poor metric for measuring MLP's. Pay attention to distributable cash flow (DCF). This metric actually measures the cash available for distributions. If DCF/unit drops below 1.0, make sure you understand why and what the partnership is doing to get the ratio above 1.0. MLP's will occasionallly borrow to maintain their distribution while they are waiting for large capital investments to begin to generate cash. This is not a problem, but make sure you understand where future increased cash flow is going to come from.