Kinder Morgan Canada Limited (TSE:KML): What You Have To Know Before Buying For The Upcoming Dividend
If you are interested in cashing in on Kinder Morgan Canada Limited’s (TSX:KML) upcoming dividend of CA$0.16 per share, you only have 5 days left to buy the shares before its ex-dividend date, 30 January 2018, in time for dividends payable on the 15 February 2018. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I take a deeper dive into Kinder Morgan Canada’s latest financial data to analyse its dividend attributes. See our latest analysis for Kinder Morgan Canada
5 checks you should do on a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
Is their annual yield among the top 25% of dividend payers?
Does it consistently pay out dividends without missing a payment of significantly cutting payout?
Has it increased its dividend per share amount over the past?
Does earnings amply cover its dividend payments?
Will the company be able to keep paying dividend based on the future earnings growth?
Does Kinder Morgan Canada pass our checks?
The current trailing twelve-month payout ratio for KML is 113.40%, meaning the dividend is not sufficiently covered by its earnings. In the near future, analysts are predicting a payout ratio of 104.65%, leading to a dividend yield of around 5.35%. In addition to this, EPS should increase to CA$0.59. Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. Unfortunately, it is really too early to view Kinder Morgan Canada as a dividend investment. It has only been paying out dividend for the past one year. Generally, the rule of thumb for determining whether a stock is a reliable dividend payer is that it should be consistently paying dividends for the past 10 years or more. Clearly there’s a long road ahead before we can ascertain whether KML one as a stable dividend player. In terms of its peers, Kinder Morgan Canada has a yield of 3.71%, which is high for Oil and Gas stocks.
Next Steps:
Now you know to keep in mind the reason why investors should be careful investing in Kinder Morgan Canada for the dividend. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. There are three fundamental aspects you should look at:
1. Future Outlook: What are well-informed industry analysts predicting for KML’s future growth? Take a look at our free research report of analyst consensus for KML’s outlook.
2. Valuation: What is KML worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether KML is currently mispriced by the market.
3. Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
