[warning folks...Abter is playing with his spreadsheets again...run, hide !]
You are getting at the key bottom line question: which has been better, KMP or KMR?
I ran an analysis as follows: 1) Purchase $10,000 worth of KMP and KMR at closing price on 1/3/206 (first trading day of 2006) 2) Hold onto all KMR dividend shares 3) For KMP, take distribution $$ when received and purchase more KMP units at close of payment date (no transaction costs). 4) analysis all through 9/11/09 (this past Friday).
The results surprised me.
KMR: you now have 32.8% more shares then you have started with KMP: you now have 30.5% more units than you started with.
So...the higher yield every time is working...your KMR # of shares has grown faster than the KMP # of shares.
BUT (you knew this was coming)... Which investment has higher value?
Up through September 2008 KMR was doing better the majority of the time. It hit an all-time peak on 12/17/2007 when the KMR investment was 7% ahead of the KMP investment ($13,125 for KMR, $12,258 for KMP).
At the end of September '08 KMR was still looking good (+4.1% over the KMP investment).
But as the overall market hit the wall in October, the "KMR discount" started to soar. KMP was getting hit hard, but KMR was hit worse. At a sharp trough on 12/10/2008 the KMR investment was 10.5% behind KMP. Both were still up from the purchase date, but KMP was at $12,375 and KMR at $11,082.
Things got worse for both investments, hitting a low for this pair of investments on 3/9/2009. The KMR investment was under water ($9,900), and KMP was at $10,585. So KMR was then "only" 6.7% behind KMP.
Since then both KMP and KMR have rebounded nicely. on 9/11/09 the KMP investment was worth $14,435, and the KMR investment was worth $13,525. So over this particular analysis period (Jan 06 to Sep 09) the KMR investor is 6.3% behind the KMP investor.
It is worth noting that both have done relatively well through these very troubled times. The KMP investor has a total return of 9.95%/year, and the KMR investor has a total return of 8.18%/year. The S&P 500 was down 5.3%/year over that period.
Bottom line: the rapid increase in the KMR discount in October 2008 has had a serious impact on the outcome for the KMR investor, and pretty much determines the outcome of the KMP vrs. KMR analysis.
Right now KMR's price is 13.5% less than KMPs. KMR's price would have to climb to $49.66 for these two investors to be equal. $49.66 would be a KMR discount of 8.3% (KMP's price was $53.8 on Friday). An 8.3% discount is well within the historical normal discount range, but a smaller discount than we have seen since December '08.