The KMR stock dividends are treated the same as a stock split. I call it mini because you get a few extra shares. Similar to VGR. Cost basis is the costg for your original shares and time basis for LT and ST capital gains are the time for your original share purchase -- just like a stock split.
Believe it or not you have to have Fidelity reinvest the dividends -- even though the dividend is shares of stock -- to get fractional shares of KMR. Did this awhile ago with an associate and it took a bit of time. Not intuitive but it is the way their system works. AND, after you get those shares put in the original purchase date of your KMR shares because this is treated as a mini-stock split by the IRS.
Go to Google Finance, black menu banner at the top has Drive, click on it. From the main Drive page, click on Create and select spreadsheet.
You can do these calculations real time in a Google Spreadsheet for all the Kinder securities. GoogleFinance("KMR") will get the real time price for KMR, then you can use spreadsheet calculations to calculate current yield. I actually put the stock symbols in a separate column, say column A, then put GoogleFinance(+A1) in cell B1 and copy the formula down the B column for all the symbols in A.
I'm suggesting that both KMI and 10-year Treasury notes will go down in price and up in yield. My longest dated Treasury investments are 1-year Treasury bills. Won't touch anything longer for years probably. Investors underestimate the value of cash and T-bills that don't go down 10-15% over the course of the year.
Consensus target prices will be lowered. The numbers are already being reviewed I guess.
I'm expecting 10-year Treasury notes to yield 4% next year. Tack on 200 basis points for risk and that puts KMI at a yield of 6% -- i.e. lower price than here.
No. Best I see technically is a re-test of the double top at $84. If ten-year Treasury note yields break to a new high, KMP will test the 52-week low.
10% of 5% is 50 basis points. 10-year Treasury note yields are going up at twice that rate. It looks like KMI will probably go to 5.5% to 6% yield next year. I still have a core position in both KMI and KMR but I am tempted to sell call options or sell both out completely.
Operating cash flow of 4,408.00 easily covered capital expenditures and dividends 2,211.00 + 986.00 = 3,197 leaving cash for stock buy backs of $1,198.00 and debt buybacks of $49. I would say the dividend is well covered here. Need to look elsewhere for the continuing decline in the stock price.
And here we are at 7.02% yield and 10-year Treasury notes are only at 2.75%.
"1) It is generalization to compare bond and stock dividends..."
Standard financial analysis. The Fed has used the Fed model for decades to compare the earnings yield on the stock market to the 10-year Treasury. High yield stocks tend to pay out almost all of their earnings, so this approach is comparable to what the Fed does. But this is a specific approach, one of many, and it is appropriate for high yield stocks.
2) "Your idea to price specific stocks based on dividend yields of bonds is flawed."
I'm comparing high yield risky stocks that are bought for their yield to 10-year Treasury bond yields which are a reasonable risk-free asset if held to maturity. A 4% 10-year Treasury yield will depress CTL stock.
3) "That reasoning would cause any stock that pays less then six percent to be sold off today ... and besides that many stocks dont pay any dividend at all."
This analysis is specific to CTL. Other stocks bought for their dividends have different parameters. For low yield or no yield stocks you use cash flow yield or free cash flow yield.
4)"..besides that the fed isn't raising bond rates anytime soon"
The market has already started raising bond and note rates, started last year. 10-year Treasury yields bottomed out at around 1.58% 11/15/2012 last year and hit a high of 2.98% this year. The Fed probably will taper quantitative easing at some point. The is what spiked rates up to 2.98%. The Fed can control short-term interest rates, not long term interest rates.
5) "This stock is going up based on business fundamentals and investor psychology. "
The fundamentals are iffy here at best and the stock has been going down not up. Investors are selling other, higher quality yield oriented stocks also.
Since 4/1/2013 CTL has traded at an average yield premium of 3.92% over 10-year Treasury yields. If 10-year yields go back to 3% or so, CTL should trade to yield 3% + 3.92% or 6.92%. CTL has to trade at $31.21 (4*$0.54/0.0692) to yield 6.92%. The high yield premium was 4.52% which would imply a yield of 7.52% 3.00%+4.52%. CTL would need to trade at $28.72 ($0.54*4/0.0752). I think [$28.72,$31.21] is the reasonable downside risk for CTL. The upside would come from lower 10-year Treasury yields or a large institutional buying program
And you focus on sarcasm rather than looking at my analysis? I'm posting reasons using numbers; argue with the analysis.
Anyway, the easy money in dividend stocks is over so I'm doing the current stock yield minus the 10-year Treasury analysis on stocks I own or recently owned. Not looking good for most of them, i.e. I think they will all head lower. Posting here for those that have an interest.
I owned CTL in my IRA and sold it awhile back. I held onto my CTL in my taxable account until I stopped myself out at my cost basis.
I'm monitoring logs on computer runs and updating my stock analysis to pass the time. The computer runs are for covered call writes. When I have time between, I post here.
They pay a distribution, not a qualified dividend. The distribution reduces your tax basis. Make sure you touch base with a tax professional that understands Master Limited Partnerships.
Goldman Sachs is at $36 as of 9/30/2013. Market Watch average of analysts's targets is $35.87. Maybe others have not updated their forecasts and are ignoring rising interest rates? VZ and T have also pulled back from their highs and are well under their target prices. VZ, T and CTL are bond equivalents. If long term Treasury yields go up over the next year, the price targets and stock prices will come down.
Wall Street is never very good at getting investors out of stocks or reducing their stock market exposure and, if they were always right? They'd go private. Brokerage firms have to have something to push and they can and do change their minds.
10-year Treasury interest rates are on their way back up, possibly to 3.00%. KMR/KMP are bond equivalents. KMR trades at an average of 4.80% over 10-year Treasury yields over the last year. If 10-year's go back to 3% or so, KMR could reasonably be expected to yield 3%+4.80% or 7.80% or a price of 69.23 ($1.35*4/0.078).
I did not buy, vger44 bought. I would not buy and I'm currently trying to sell some T and VZ; sold all of my CTL already. I think catching a falling knife should include a stop loss. CTL could easily go back to an 8% yield would be at a price much lower than here. Bond equivalents are well off their highs and probably going lower as 10-year Treasury yields go back up to 3% or so.
Probably better to look to buy KMI at a price to yield 5.18%. KMI's current yield has averaged trading at 2.18% over 10-year Treasury's over the last year. If 10-year's go back to 3% or so, KMI should yield 5.15% for a price of $31.84. Right around the 52-week low.
Better entry point would be to yield 6.15%. T trades at about 3.15% over the 10-year Treasury note yield. If 10-year's retrace to around a 3% yield, that would put the T yield at 6.15% for a T price of $29.27 = (4*$0.45/0.0615).