I read an analysis claiming KMP currently undervalued and should be 90.
It got me speculating on the future value of KMR in like 5-10 years.
I am interested in the opinions of others on the board.
Assuming KMR can reach $100 within next year or so, how long do you think it requires for KMR to reach $150?
5 years? 10 years?
I'm assuming Dist growth of 5% annually,which gives a 5 year result of about $110 if the relative valuation does not change...In order to get to $150 with no valuation change you need 12% annual growth rate.
I've held KMR for 10 plus years. The best years are when the price is low and the shares accumalate faster. The price movement may slow with interest rates rising in the future instead of falling. Some year they may be too big to grow much. Also with the rapid change they could have another dud like the cross country gas pipe they sold for a loss soon after it was finished. The need evaporated with new found gas at the out put end. 10 years if a Corrolla stays under $25,000. 2002-2009 +5 2009 -2012 +50
Forbes reported the Trefis team has a model that gives $91.00 as a price estimate for KMP. KMR should trade 6% to 10% less, maybe because it is worth less on liquidation. How are you accounting for that fact that KMR is s dividend stock. Currently it pays out $5.38 a year. So even if the price stays at current levels it would still be up over $25.00 in five years.
A more realistic estimate would be, KMR trades at about 6% to its yield which is increasing itself at a rate of about 6%. So, using the current yield as starting point, increase that at 6% per year for as many years as you like, then assume that yield is 6% of the market price in each of those years.
Arbtrdr, KMR should trade at a premium. Wikinvest suggests 6 reasons why it probably trades at a discount. The discount is and advantage to accumulators I would not like to see it go.
The IDR split is irrelevant. We get what we get, and the surplus goes to KMI to our benefit. KMI is subject to double taxation we are not. If our returns jumped around 50% one year, 25% the next, we could never get funding. The Wall Street mind is consistency, not volatility. Even if the trend is lower.
The two do not own exactly the same thing, but that only comes up in liquidation. KMR only holds i-shares.
Both get the same pay out I will agree, and that is what is important. But if you are reinvesting the distribution, KMR is the clear favorite because the effective reinvestment occurs sooner. This can have the effect of two extra months a year that your distribution is working for you.
I think anyone would like to dispense with K-1s and 1099s paperwork, especially institutions. K-1 come out late so they delay filing. Money now is worth more than the same dollar amount later.
KM claims the distributable cash flow cover the distributions by thirty million in 2012. Are you confused by what Accountants call earning per share EPS. As a lot they are poor investors.
sumflow - The price models for KMP generally show something up about 1-% in stock price plus the distribution. Need to remember that Kinder has some headwinds - IDR split at 50%, still not covering the distribution and at some point (early 2015?) interest rates rising. Got to like it that the MLP index hit an all time high the morning.
Wondering why you think KMR should trade at a discount to KMP? The two own exactly the same thing. The comparable pair with Enbridge has the I shares selling at a premium to the straight MLP. There are advantages to KMR for IRAs and other holders where capital gains is preferable to getting a K-1.