So the best argument that a cheerleader has made as to decling margins is that Cap-Ex is charged against operations and creates a loss.... (of course maintenance is charged against opps but maintenance is not a "new project".... this was a focal point of Brian Nelsons criticisms of KMI)
Creative.... but Id love to hear where he learned that
Would love to see Brian Nelson pick that to pieces
I'm looking for honest opinions regarding the latest announcements from KMI re the projection of $.80 dividend for 2018. (I know its only a projection, but KMI has been pretty accurate in the past.) I see KMI stock owners as having been ok with about a 2.5% yield with a $.50 dividend. If that is the case (big if, I know) and $.80 dividend would indicate the stock should be near $32. Well maybe not 32, but a good bit closer then it is. So go easy on me and share why you think KMI is not trading higher, maybe a lot higher.
Why I like KMI stock:
KMI's Natural Gas Pipelines 1) KMI has 70,000 miles of natural gas pipelines running through the heart of North America. These pipelines supply approximately 38 percent of the natural gas consumed in the U.S. 2) Every important natural gas resource is connected to these pipelines. 3) Natural gas demand in the U.S. will increase by 35 percent to nearly 110 billion cubic feet per day during the next decade. 4) Areas of expansion are as follows: more capacity needed in the Northeast, increased demand for gas-fired power generation, liquid natural gas exports, industrial demand growth, and exports to Mexico.
It seems like the primary topic on this board is always accounting!
The dividend guidance was supposed to be the BIG "catalyst." This board probably represents a very small sample of investors. It seems like many are 1) surprised by dividend guidance 9 months before the dividend would be declared; 2) disappointed by the market's reaction (note oil is up 3% today; and, 3) a little disappointed by the amount of the dividend increase.
So another piece puts it this way..... facts are facts man.... and without the dividend hype KMI would have crashed hard.... which is why we get the dividend guidance when it was not expected... these hard facts will weigh on the stock.... not to mention.... KMI only met its EPS estimate because it came down 2 cents.... which equates to 12.5% in the 2 weeks leading in to the report....
Kinder Morgan, Inc. reports financial results for the quarter ended June 30, 2017.
Summary numbers: Revenues of USD 3338 million, Net Earnings of USD 375 million. Gross margins narrowed from 39.20% to 33.97% compared to the same period last year, operating (EBITDA) margins now 43.95% from 47.26%. Change in operating cash flow of 1.80% compared to same period last year is about the same as change in earnings, likely no significant movement in accruals or reserves. Earnings rose compared to same period last year, despite decline in operating and pretax margins.
Just a few off the top observations from the recent call:
- The 5.0 ratio is off the table, it was always an arbitrary, meaningless number, so no big deal.
- Debt ratio currently is 5.1 and will go to 5.2 by the end of the year. This is primarily because of debt associated with Trans Mountain Expansion.
- This was likely the best Q of the year because Cap Ex will be increasing.
- The CFO was unable or unwilling to answer this question: "What are you assuming for growth capital as a run rate from 2018 to 2020 to sort of pay out that dividend, maintain the coverage, the buybacks etcetera". There is always something about KMI's financials or call that makes me feel like throwing up, this was it.
- The new dividend guidance is based on many, many assumptions the biggest are probably new projects and estimated increase in gas demand. As RK said this is what came out in the wash. Opps, I have to throw up again.
Given that this could be the best 2017 Q, it makes sense that they might want to prop up the stock price. Next Q when margins are less, it would have been more difficult to believe and justify.
I suspect that the dividend guidance will be a moving target. In about 9 months, the board will vote on the dividend. That's when we will know the true dividend increase.
I keep making rather smart trades on this.... cant think of the last losing trade.... yet everyone argues with my opinions....
Im good with the status quo.... cause Im making money
Buy today and receive 6.0% yield in 2020 and beyond. Target price is $26. That would still be an attractive yield to retirees. Pretty safe as the country exports more gas and as gas replaces coal. Better return than the SP index.
So who saw the headline where a "bear" scared 200 sheep into diving off a cliff to their deaths?
Coulda been a stock market story.... might even be a KMI story
Two years ago was @$43.00 long way to go.
So what does the IRS have to say about dividends in excess of EPS
"Nondividend Distributions A nondividend distribution is a distribution that is not paid out of the earnings and profits of a corporation or a mutual fund. You should receive a Form 1099-DIV or other statement showing the nondividend distribution. On Form 1099-DIV, a nondividend distribution will be shown in box 3. If you do not receive such a statement, you report the distribution as an ordinary dividend.
Basis adjustment. A nondividend distribution reduces the basis of your stock. It is not taxed until your basis in the stock is fully recovered. This nontaxable portion is also called a return of capital; it is a return of your investment in the stock of the company. If you buy stock in a corporation in different lots at different times, and you cannot definitely identify the shares subject to the nondividend distribution, reduce the basis of your earliest purchases first."
That means that KMI is actually required by Tax law to issue you a 1099 that calls for the excess to be taxed at your regular income rates
And for most people who own dividend stocks their regular rates are usually above 25% for excess income
Sweet! $0.80 dividend next year, $1.00 in 2019, and $1.25 in 2020. And authorization to buy back 5% of stock. Nice. Very nice!
Looks like (short sellers) are working desperately to keep price down.
.80 ? BFD!!!!! Here was the plan........................ qtrly div yearly div 2015 $0.500 $2.000 2016 $0.550 $2.200 2017 $0.605 $2.420 2018 $0.666 $2.662 2019 $0.732 $2.928 2020 $0.805 $3.221 10/15/14 dividend raised .43 to .44 1/21/15 dividend raised .44 to .45 4/15/15 dividend raised .45 to .48 7/15/15 dividend raised .48 to .49 10/21/15 dividend raised .49 to .51 12/8/15 dividend reduced .51 to .125
I have to point this out again.... when every segment sees a decline in profit while revenues rise in the significant fashion as they did.... MARGINS were hammered.....
Margins are like one of the first things an "investor" looks at....
In the real world when margings get crushed.... so does the equity
So mgmt says what do we do.... a little sleight of hand... a diversion from the fact set... hype at its best
Oh we are raising the dividend by 60%.... and then 25%.... Tell em what they want to hear..... let them eat cake.....
Those that think in reality have a simple question.... how do you raise the dividend in an enviornment of drasticly declining margins..... a hic-up in the economy where revs retract.... what happens?
This is a recipe for disaster
Wise, I thought I read pipeline does not cross any land belonging to the Sioux or have no effect on their water supply. Think KMI has their ducks all lined up and most is on private land. Maybe they learned from ETP. At what price did you short this stock because I see 24 or 25 by years end. It is America's future.
etp & epd are down 2% and over 1%. what's going on with pipes?
Revenue looks great, nice numbers. Dividend even better.
Does anyone realize that every KMI segment saw a decline from same Q last year...
Yet the hype is they will double the dividend in two years....