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Kinder Morgan: Priced For Disaster, But Offering A Safe 8.5% Dividend Yield

Published Fri, 16 Oct 2020 09:00:17 -0400 on Seeking Alpha

Seeking AlphaDividend Ideas | Basic MaterialsKinder Morgan: Priced For Disaster, But Offering A Safe 8.5% Dividend YieldOct. 16, 2020 9:00 AM ET|| About: Kinder Morgan, Inc. (KMI)by: Jonathan WeberJonathan Weber Cash Flow KingdomThe Investment Community where "Cash Flow is King"SummaryKinder Morgan's business is more resilient than many think.
The company owns mission-critical infrastructure that will remain in need for decades.
Kinder Morgan offers a high dividend yield that looks quite safe; going forward that dividend will likely get raised.
Article Thesis
Kinder Morgan (KMI) is being lumped in with the broad energy industry as a whole and has sold off a lot this year, despite the fact that the impact of low oil prices and the current pandemic on its operations is not too large.
The company continues to generate sizeable cash flows, offers a well-covered dividend that is currently yielding 8.5%, and its shares should have meaningful upside potential once things normalize a couple of quarters from now.
Source: Stock Rover
Kinder Morgan is among the leading midstream companies in North America. Its shares look quite inexpensive on an EV to EBITDA basis, on a price to cash flow basis, and relative to how shares were valued in the past. Shareholders get an 8%+ dividend yield. Some of its peers are even less expensive while offering even higher dividend yields, but that is due to the fact that the whole sector is currently priced for disaster due to being very unloved.
Kinder Morgan And The Oil Price Crash
Many investors put midstream companies and oil producers into the same basket when it comes to the exposure these companies have to oil price swings. This means that investors bid up pipeline companies when oil prices rise, while they sell off midstream players when oil prices are trending down. In many cases, this is an overreaction, both to the upside as well as to the downside, due to the fact that midstream players are... Read more