It is nice that there has been no insider selling in either KMR or KMP, according to Yahoo Finance, since May 2011. In contrast, Richard Kinder bought KMR in August significantly, at a level between $60 and $61 per share. His buying would seem an excellent signal, in my opinion, as he is CEO. So far, his purchase has appreciated nicely compared with SPY or total stock market proxies like VTSMX, with less volatility IMO. Why sell now, when the insiders aren't (unless you are strapped for cash)?
Also bullish for the KMP, KMR, and the rest of the MLP sector, IMO, is the fact that the congressional "supercommittee" adjourned without proposing any reduction in MLP tax advantages.
Finally, if the "Bush" tax cuts, a nice boon for investments by Americans (primarily in American assets, since US investors place well more than half their distribution-producing investments in American assets), expire, that will increase the importance of KMR's tax advantages. As we all hopefully understand, those tax advantages exceed KMP's (and almost all other MLPs) because KMR pays dividends in stock rather than cash. As long as you retain the stock, you pay no tax.
I added modestly (another $4000 or so) to our KMR position on the dip yesterday. If you succeed with KMR or KMP investing, please consider donating some to charity.
"...Most investors have no intention, or possibility, of spending it all..."
I'm not in the same league, so passing on to heirs or having more than I can possibly spend hadn't crossed my mind. Must be nice.
Us poor folk will be selling at some point because we need the money.
I offer my 2 cents. Put kmp in IRA. They usually over the years have a 14% return tax protected. You have to take out distributions at 70 1/2 It can be passed directly to wife or passed to beneficiaries via inherited IRA's (then in 5 yrs or at their age over years- preferable via trust and executor. Rule of 72 doubles in about 5 yrs. In regular brokerage live off distributions.
So Warren Buffett should be converting his wealth to cash real soon?
Wealth has to be placed somewhere. Most investors have no intention, or possibility, of spending it all. The heirs and beneficiaries get the assets eventually.
Thanks for the post. I understood the return of capital. But my point remains that IMHO KMR is better tax advantaged because its distributions aren't taxed and aren't return of capital. Thus, when you sell your original KMR investment or if you donate it, you still have the original, non-reduced basis for tax purposes. KMP in contrast, as you note or imply, would have a reduced tax basis upon sale or donation.
<<<Thus, when you sell your original KMR investment or if you donate it, you still have the original, non-reduced basis for tax purposes.>>>
Not correct. To illustrate, suppose you buy 10 shares for 50 per share for a total cost of 500. Then the company issues a 1 share stock dividend. Now you have 11 shares which cost 500, so your tax basis per share is 45.4545 (500/11), not 10 shares with a basis of 50 and 1 share with zero.