Im a fan of kmp, but it's been revealed by other posters that kmp has a very large gap between EPS and the dividend. EPS is .14 per share and the dividend is $4.6 per share which leaves a funding gap of $4.46. They project the dividend to be $4.9 in 2012, and my guess is EPS will grow to .16 at best. Which again will leave a funding gap of $4.74.
So my question is how will they fund this gap? Do yo think the board will authorise a reverse-dividend? That is instead of crediting the accounts we hold kmp in, they debit us $4.74 per share?
Yes, the money's being distributed, but try taking a closer look at how much is going in, how much is going out, and where it's going out. The problem comes down to the fact that virtually all the money coming is coming from investors/bond holders of the LP, but 50% of the money coming out (i.e. distributions) is going to the GP.
You don't own the asset base. You own 50% of the cash flows after debt payments, capex, and GP incentive payments. And after annual dilution. On a per share basis, liquidation is very real.
That's how MLP's work. Since they pay out most of their cash flow as distributions they need to issue equity and/or debt to grow. It's the way MLPs grow and increase cash flow. Without doing that they would never be able to grow and increase distributions. It doesn't imply they are liquidating. All you have succeeded in doing is demonstrating that you don't understand the MLP business model. KMP can and probably will continue "liquidating" like this for another 15 years and more.
Liza said: "I guess it's been liquidating for the last 15 years with rising unit price and growing distributions for the whole period ;-)"
Yes, I think that's essentially correct. Did you ever bother to see how much capital has been raised to fund these distributions over the whole period? Years ago when I first read Kurt Wolf(e?)'s analysis of KMP, I was inspired to check just how much equity funding and bond purchases have been made for this stock and it was quite enlightening. This is a stock that completely fuels it's "growth" and the distributions via other people's money (new investors and bond holders).
Compare the book value of 3rd quarter 2011 and 2010. Per share, it declines (minimally, but still a decline). How is it possible to invest billions and yet suffer a decline in book value? That's liquidation.