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US Midstream Companies with the Largest Capital Spending Plans

PART:
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Part 9
US Midstream Companies with the Largest Capital Spending Plans PART 9 OF 15

What Does Kinder Morgan’s Current Dividend Yield Indicate?

Kinder Morgan’s dividend forecast

Kinder Morgan (KMI) declared a flat dividend of $0.125 (or $0.50 annualized) per share for the sixth consecutive quarter ending in 2Q17. The company is expected to keep the dividend flat at $0.125 per share for the next two quarters.

However, the midstream giant announced plans to resume dividend growth starting in 1Q18. KMI is targeting a 60.0% annual dividend growth for 2018 to $0.80 per share. It’s also expecting a 25.0% annual dividend growth for 2019–2020. In its second-quarter earnings call, it announced a $2.0 billion buyback program.

What Does Kinder Morgan’s Current Dividend Yield Indicate?

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KMI is expecting a dividend coverage of 2.5x by the end of 2018 and more than 2.0x during 2019–2020. It has announced a dividend cut from $0.51 per share to $0.125 per share in effect from the fourth quarter of 2016. That drove KMI’s distribution coverage higher.

Kinder Morgan’s dividend yield

Kinder Morgan is currently trading at a dividend yield of 2.6% based on its recent dividend and at a dividend yield of 4.1% based on its 2018 dividend forecast. The sudden fall in dividend yield in early 2016 was due to the dividend cut. Its current yield is below the last five-year and two-year averages of 4.2% and 3.7%, respectively. However, it’s above the last one-year average of 2.4%. That might indicate a slight undervaluation in KMI stock. KMI’s dividend yield is still higher than the SPDR S&P 500 ETF (SPY), which is at 1.9%. However, KMI is still underperforming SPY in terms of total returns over the past year.

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