A sale is a sale whether on the open market or directly to KMI in a merger. No different in tax consequences. Look back on this board to the topic "KMP UBTI" which was posted on 9/20/15 by a person who had a large tax payment made out of his IRA by Vanguard.
Motely Fool article says investors need to be reassured by KMI that KMI operates in its own world, isolated from what goes on around it, impervious to any impact, now and forever in the future, from the plunge in oil prices. If KMI doesn't say that "absloutely nothing has changed, investors will conclude that there is something wrong wilth KMI, specifically with KMI, and abandon it for any other company in the energy industry.
"Coverage" will be tight, but there's always the 4th quarter, and the other quarters that follow. KMI isn't going to tout its dividend growth and then go backwards for one quarter.
Yes, all dividend income from KMI is qualified. But the portion that is return of capital is not a dividend. It's return of capital. I haven't looked at Form 1099-DIV, but maybe ROC is on line 3 of that form.
One needs a minimum level of what to qualify for the subsidy? Wouldn't the subsidy go to people with lower income? KMI treating a portion of its dividend as return of capital, rather than dividend would seem to be beneficial for you. Lower taxable income is better.
Pay 100% of last years liability and you will be safe from penalty. Are you really cutting it that close with your quarterlies and your KMI dividends are that large?
Its lies and distortions that become hard to tolerate on this board. No one will deny that some portion of KMI's dividend will be a return of capital. The lie that KMI's dividends are paid out of debt and equity issuance is not welcome here.
"Also, a dividend being qualified or not depends on the individual, not the company."
Now that statement is not true. Think about it. It will be qualified for some shareholders and not for others? What can I do to make a REIT dividend qualified?
You are saying that KMI's net book income plus depreciation expense, minus maintenance capital requirements does not exceed total dividends on an annual basis?
If the Forbes article author thinks KMI is diluting shares by 5% to maintain its dividend, and that there are cash flow issues, why did he buy the stock? Probably because he must write for a living, but what he does with his own money is his own business, and he is careful with his own money.
Instead of the shareholders? Someone should tell KMI management about this. The billion $ shift won't be well received by the shareholders. I like your reasoned and responsible comments better than this one.
The wizard and doogoo1 should take a lesson from you in how to responsibly question the company's current business model without resorting to allegations of questionable accounting and ponzi schemes. Putting it the way you did, you certainly are making a valid point.
How are current shareholders going to pressure RK to change course? It usually takes an activist investor (like Icahn) to pressure a company. Voting by selling your shares, or not buying them, is so very indirect.
The pipeline business in a growth phase is kind of unique because almost every project is guaranteed to be financially successful. Thus, it is much safer for a pipeline to fund a large part of its growth thru debt. I've owned enough electric utilities in prior decades who wanted to become "growth" companies. The cash burned a hole in their pockets. Investments in Latin America, in fiber optics, energy trading, all had to be completely written off. Having to raise debt and equity for each large new project instills financial discipline on the company, and helps to insure that only realistic projects within the company's core competencies get approved.
Growth in share price over a long term can be lost so quickly in a market crash or industry downturn. I am glad of all the cash I've gotten from the MLPs I've owned for the past seven years. It lessens the present sting of lower unit prices. Most pipeline companies are still organized as MLPs, throwing off generous cash. But an open mind is always needed.
KMI shareholders aren't children. Was it a promise that RK made, or a projection? The roll up announcement was made in August of 2014, before anyone knew how low global oil prices would go. If KMI management were to say that they must be cautious in light of the prolonged oil price slump, and that they must hold the dividend steady for the time being, I would approve. Most likely, KMI can continue with its dividend plan, and satisfy its excess cash coverage goals as well.
It would be very immature and naive for any KMI investor still be in the mind frame that "a promise is a promise," in any industry notorious for booms and (always arriving when not expected) busts. I will be very happy to realize in another year that there is not some unknown loss waiting in the wings to hit KMI due to some knock on effect of low oil prices. Maintaining that 10% dividend growth is the least of my concerns. It's not a KMI issue. Its the boom and bust industry.
"KMI also doesn't expect to pay taxes for 15 to 20 years."
thewzrdaz, before you lock on to this 15 to 20 year period, and use it as a basis for numerous future postings, please try to verify that KMI has actually stated a time period during which they expect to pay no income taxes due to the MLP roll up. Just repeating something over and over until you start to believe that it is true is not something that the people on this message board should be subjected to. I know that the $20 billion basis step up will provide tax saving for many years to come, but I doubt that a 15 to 20 year period was ever stated by KMI management.
GAAP on the back burner? What does GAAP require KMI to do? Has KMI violated some GAAP rule? Does the CPA firm auditing KMI's financial reports disclose this departure from GAAP and issue a qualified opinion that KMI's financial reporting is in compliance with GAAP except for its use of DCF instead of traditional free cash flow?
The CPA frim, Arthur Anderson, went out of business due to its auditing of Enron's books. Do you think KMI's auditors are that lackadasical that they just sign off on anything KMI does?
Wizard, industry downturns happen. No one is blaming RK for low oil prices. This unexpected drop in oil prices is a good thing if it forces KMI, and other midstreams, to proceed very cautiously in their expansion projects.
Wiz, is KMI the first and only stock you've ever owned? Is this the only time you didn't sell at the top, and then sold almost near the bottom, except that the bottom went even lower due to world events regarding oil? Why the fixation and obsession on KMI? You need to confirm in your mind that you didn't get your KMI investment entirely backwards? So now your investment activity is put on hold while you deal psychologically with your KMI trade. You didn't buy ETP or WPZ last Monday and Tuesday, like I did? You won't make another dime doing what you are doing now. Get back into the game and make money. Don't wait to be proven right or wrong about KMI. Start making new money now.
Do investors really expect MLPs to be "forever" investments? They are great when the energy infrastructure industry is in an expansion stage. One can imagine that a couple decades from now, when all the pipelines have been built, its no longer a growth industry. The cash distributions may actually start to decline, since there are few new growth projects, and capital maintenance work starts increasing as the pipelines age. It would probably be wise for original investors to have sold their MLPs by then. But, for early investors, getting your original cost back out thru cash distributions, and then getting still more cash distributions taxed at capital gain rates is a great thing. We are alive now, get the cash now, up front. That's the kind of investment we want. Who's complaining? Only Nelson and the wizard.
For the large interstate NG pipelines, the end user customer's bill includes a demand charge (payable regardless of volumes transported) and a volumetric charge based on the volumes of gas shipped to the customer. The demand charge is good downside protection for KMI, but ideally, the additional revenue from normal to high thruput is what makes a great year financially.
RK mentioned the diversified asset portfolio. I think there is more risk currently in the producer area (supply push), with producers cutting back on drilling. With low NG prices, the end user (demand pull) customer has no incentive to cut back on gas usage. Just the opposite.
You wrote, "they do provide DCF additional to GAAP." You do have a different concept than me. DCF is Distributable Cash Flow. Brian Nelson argues that KMI should be using Traditional Free Cash Flow, rather than DCF. So are you saying traditional free cash flow is GAAP (in accordance with GAAP)? Is there a GAAP standard for what is called free cash flow? You've read more on this specific topic than me, so I'm asking.
We are not being bullish or bearish on KMI here. We are trying to understand Nelson's and the wizard's arguments. Getting to the heart of this will help readers to know that the wizard's harping on this last week was essentially BS. The wiz is never going to explain this in detail. He wants to spread confusion and misunderstanding among the investors.
I've heard of GAAP earnings, and they sometimes differ from reported earnings because of one-time, nor-recurring items. Is there a GAAP FCF?
I thought you were referring to Mr. Phill's summation of Hines Howard's sentiment of being positive regarding midstream MLPs and negative on upstream MLPs. I though you were describing upstream MLPs as having push projects and midstream MLPs as having pull projects (or vice versa). I didn't see how push vs pull fit in as a reply to Phill. Ok, just so you understand.