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Kinder Morgan, Inc. Message Board

  • busy26795 busy26795 Aug 19, 2014 3:55 PM Flag

    Cramer just bought KMI for AA+

    We'll also buy 500 shares of Kinder Morgan (KMI:NYSE) at
    $41.39. In energy, we like to own stocks that either have an
    ongoing internal restructuring, a commitment to a high
    payout ratio (and a growing divided yield), or management
    that is committed to creating shareholder value. KMI is all
    three. We like the recent move to simplify its corporate
    structure, going from a master limited partnership to a C
    corporation, which will lower its cost structure and enable
    the company to complete acquisitions for further growth. It
    also has an attractive 4.2% dividend yield and an attractive

    So much more detail


    Jim Cramer, Stephanie Link, and TheStreet Research Team

    Sentiment: Strong Buy

    SortNewest  |  Oldest  |  Most Replied Expand all replies
    • been_there_done_that_twice been_there_done_that_twice Aug 19, 2014 4:36 PM Flag

      Thank you for that information. If you want income growth over time, here's a company that looks like it will be able to do it via organic growth, not buybacks and financial engineering.

    • KMI was set up as the general partner, with interests in
      Kinder Morgan Energy Partners LP (KMP:NYSE), El Paso
      Pipeline Partners LP (EPB:NYSE) and interests in several
      legacy El Paso pipeline and storage assets. It was one of
      the largest general partners in the MLP space with a very
      diverse set of assets across the energy midstream spectrum.
      Following last Sunday night's acquisition of all of its
      equity interests, the company's structure and growth story
      has changed significantly, and for the better. Because of
      this transaction we want to be involved in the name as it
      has transformed itself into a simpler C Corp structure,
      which will produce higher dividends, see lower costs, do
      more M&A, and create the world's third-largest energy
      company behind Exxon Mobil (XOM:NYSE) and Chevron (CVX:NYSE).

      The deal announced last week was the acquisition of all the
      outstanding equity interests of KMP: Kinder Morgan
      Management and El Paso Pipeline Partners, which will
      consolidate the midstream assets into one entity. KMI will
      issue $40 billion in equity and pay $4 billion in cash. The
      deal will close in 4Q 2014. In essence, it will remain an
      MLP under a C Corp structure, so it will continue to pay out
      the majority of its cash flow in the form of a dividend and
      then finance growth capital with outside debt and equity.

      • 2 Replies to busy26795
      • yahoo keeps taking away the rest of the AA+'s long. I see it then it disappears. What a mess they made of their message boards. It's a shame!

      • We like the deal for several reasons: It simplifies the
        company structure, reduces the cost of capital by half,
        positions the company to raise the dividend annually by 10%,
        gives it size/scale advantages and capability to be an
        aggressive consolidator in the industry, and most important,
        investors can focus solely on the strong underlying
        fundamentals rather than the distractions of various moving
        pieces, which should afford it a higher valuation multiple.
        Also, as a C Corp the company opens up its potential
        investor base compared to its general-partner peers.

        The new entity will remove the incentive distribution
        structure that has prevented the company from paying out a
        higher distribution and it raises the fair value estimates
        substantially. It creates an energy midstream giant with an
        enterprise value of $140 billion that generates $8 billion
        in earnings before interest taxes depreciation and
        amortization annually and nearly doubles the cash available
        dividends to $7.3 billion in 2020 from $4.7 billion in 2015.
        This translates into 10% distribution growth between 2015
        and 20120. This alone is reason to own the position.

        Sentiment: Strong Buy

21.22+0.27(+1.29%)Jul 22 4:01 PMEDT