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Should You Include Kinder Morgan in Your Portfolio?

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Analyst ratings for Kinder Morgan

In this article, we’ll look at what Wall Street analysts recommend for Kinder Morgan (KMI). At a broader level, ~52.6% of analysts rate Kinder Morgan a “buy,” ~42.1% rate it a “hold,” and ~5.3% rate it a “sell.”

The median broker target price of $18 for KMI implies a ~39.5% price return in the next 12 months from its January 20, 2016, closing price of 49.9%. KMI’s MLP peers EnLink Midstream Partners (ENLK) and Energy Transfer Partners (ETP) have “buy” ratings from 61.5% and 81.3% of analysts, respectively, and 61.5% of analysts rate Williams Partners (WPZ) a “hold.” KMI constitutes 3.9% of the First Trust North American Energy Infrastructure Fund (EMLP).

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Outlook for Kinder Morgan

Investors can consider the following positives and negatives before they decide to include KMI as a long-term investment.

Positives

  • a five-year project backlog of $18.2 billion
  • KMI is expected to benefit from the rise in natural gas demand from power utilities in the long run

Negatives

  • KMI is highly leveraged with a debt-to-EBITDA[1. earnings before interest, tax, depreciation, and amortization] multiple of 5.6x
  • with a recent dividend cut, KMI is no longer an attractive income opportunity
  • KMI is exposed to commodity prices through its CO2 and natural gas midstream businesses
  • out of KMI’s $18.2 billion five-year project backlog, $5.4 billion comes from the expansion of the Trans Mountain Pipeline System
  • the expansion project has been mired in regulatory hurdles for almost two years, and was recently opposed by the government of British Columbia on safety and environmental concerns

For more post-earnings coverage on midstream companies, check out our Master Limited Partnerships page.

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