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The Top 10 S&P 500 Companies with the Lowest Dividend Growth

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Part 5
The Top 10 S&P 500 Companies with the Lowest Dividend Growth PART 5 OF 18

How the Dividend Cut Affected KMI’s Dividend Yield

Why KMI’s revenues fell in 2015 and 2016

Kinder Morgan’s (KMI) revenues fell 11.0% and 9.0%, respectively, in 2015 and 2016. Natural gas sales and product sales were primarily responsible for this fall, offset by growth in its Services segment in 2015.

Revenues from the US fell in both years, followed by revenues from Mexico. The revenue decline was offset by revenues from Canada. The rate of this decline decelerated in 2016 as the industry recovered.

How the Dividend Cut Affected KMI’s Dividend Yield

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How did KMI’s EPS perform in 2015 and 2016?

Kinder Morgan’s (KMI) costs and expenses rose 2.0% in 2015 before falling 21.0% in 2016. This trend was due to significant impairment charges and losses on divestitures in 2015. As a result, KMI’s operating income fell 45.0% in 2015 before rising 46.0% in 2016.

Other expenses for KMI increased 23.0% and 15.0% in 2015 and 2016, respectively. This trend was due to rising impairments, divestitures of equity investments, and interest expenses. These factors translated into an 89.0% fall in its 2015 EPS (earnings per share) before rising 150.0% in 2016, allowing KMI’s EPS to improve in 2016.

Why KMI’s revenues and EPS picked up in 9M17

KMI’s revenues recorded 4.0% growth in 9M17. Natural gas sales and product sales drove this growth, offset by a fall in its Services segment. Its costs and expenses rose 4.0%. As a result, KMI’s operating income rose 4.0%.

Other expenses decreased 36.0% due to the absence of impairments and divestitures of equity investments. These factors translated into 182.0% growth in its EPS. KMI was able to generate enough free cash flow in 2016 to pay its dividends.

How the Dividend Cut Affected KMI’s Dividend Yield

How has KMI’s dividend yield evolved over the years?

Kinder Morgan (KMI) took a 74.0% dividend cut in 2016, and it maintained the same dividend per share in 2017. Its prices rose 39.0% in 2016 before falling 14.0% on a year-to-date (or YTD) basis. As a result, the dividend yield curve resembles Anadarko Petroleum’s (APC) dividend yield curve.

Kinder Morgan has a dividend yield of 2.8%, a PE (price-to-earnings) ratio of 72.4x, and a YTD return of -13.5%. These metrics compare to a sector average dividend yield of 6.8% and a PE ratio of 645.9x.

Comparison with broad indexes

The S&P 500 (SPX-INDEX) (SPY) offers a dividend yield of 2.3%, a PE ratio of 22.7x, and a YTD return of 15.5%. The Dow Jones Industrial Average (DJIA-INDEX) (DIA) has a dividend yield of 2.3%, a PE ratio of 21.2x, and a YTD return of 18.7%. The NASDAQ Composite (COMP-INDEX) (ONEQ) has a PE ratio of 25.4x and a YTD return of 25.4%.

The WisdomTree Global Equity Income Fund (DEW) is a dividend ETF with exposure to Kinder Morgan. DEW has a PE ratio of 17.5x and a dividend yield of 3.2%. The Vanguard High Dividend Yield ETF (VYM) is a dividend ETF with 9.0% exposure to the energy sector. VYM has a PE ratio of 21.6x and a dividend yield of 3.0%.

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