I bought some shares of KMP at $88.05 a short while ago after listening to Cramer about its high dividend yield. I am quite upset at the price drop the last few days. I looked at the P/E and it says it is 323.82. I am very shocked and I tried to look up some similar stocks and they all have normal type of P/E, not in the hundreds. Can anyone tell me if this is very abnormal ? thank you very much if you can explain a little bit to me.
<< I bought some shares of KMP at $88.05 a short while ago after listening to Cramer about its high dividend yield.>>
Did Creamer sell right after he told you to buy KMP for the dividend? If so, not a nice guy.
Buy first, do some analysis second and ask questions here third? Probably should have reversed that order.
5.5% is not a high yield, its a good yield. You are banking on new growth in the distribution from the EP acquisition. That will happen, so this is more a growth story.
Pull up a 1-year chart of KMP in Google Finance. At the 1-year low of $63.42, KMP had a distribution yield of 7.18% -- much better than 5.5%. Also note that you are buying at KMP's 52-week high -- not a good thing in general. Maybe you should have watched longer, did some homework and then snapped this up at a lower price.
And, the price you pay for a stock is the best way to control your risk in a stock. You paid the high and now you have the risk.
KMP is a master limited partnership that must pay out most of its cash flow as a distribution. It is tax advantaged. You need to do some homework on MLPs.
Price! KMP has gone from the $60s to the $80s and it is a very well run nat gas pipeline company with some oil and gas production thrown in. At some point the price of the stock gets too high.
I've learned not to buy stocks when they are above their Wall Street price targets, but I do hold on to stocks that have a good story intact. I do sometimes sell options against stocks that are above or close to their target prices.
Most are hoping to buy it cheaper, missed out on the stock run. Same reason most want the market to correct, they were left on the sidelines. KMP going over $100, some patience is in order. El Paso acquisition is a monster acquisition for the growth prospects of the company.