KMI Expects 2% Fall in 2017 Distributable Cash Flow



2017 expected distributable cash flow

Kinder Morgan (KMI) expects a DCF (distributable cash flow) of “less than 1 percent below budget” for 2017 due to the IPO (initial public offering) of its Canadian assets and impacts from Hurricane Harvey. The company earlier budgeted a DCF of $4.5 billion for 2017. If the 2017 DCF comes to be 1% below budget, it’ll be a fall of ~2% compared to the company’s DCF of $4.5 million for 2016.

Excluding the full-year impacts of KMI’s sale of 30% interest in its Canadian assets and Hurricane Harvey, 2017 DCF is forecasted to be as planned. KMI estimates that excluding repair costs, Hurricane Harvey will have an impact of ~$20 million on 2017 DCF.

Kinder Morgan expects additions to its 2017 DCF from expansion projects coming into service. However, this is expected to be mostly offset by the full-year effect of the sale of a 50% interest in Southern Natural Gas Company, the year-over-year decline in the realized oil prices in its CO2 segment, lower contributions from some gathering and processing assets, and the impact from a rate case settled during 2016.

For 2016, Kinder Morgan reported DCF of $4,511 million versus $4,699 million for 2015. KMI expects additional cash flows over the next few years as its capital projects are placed into service.

DCF is a commonly used metric to evaluate performance and to measure the ability of assets to generate cash earnings, which could be used for common stock dividends, stock repurchases, retirement of debt, growth capital expenditures, or some other discretionary purposes. It is cash flow left after servicing debt and preferred stock dividends, paying cash taxes, and expending sustaining capital.

KMI’s dividends

Kinder Morgan expects a 60% dividend increase for 2018 to $0.80 per share. The first increase is expected to be for the 1Q18 dividends. Kinder Morgan also expects 25% annual dividend growth from 2018 through 2020. Kinder Morgan had slashed its dividends by 75% in 4Q15. Kinder Morgan (KMI) currently yields ~2.9%. In comparison, the SPDR S&P 500 ETF (SPY) (SPX-INDEX) yields ~1.9%. ONEOK (OKE) and Targa Resources (TRGP) currently yield ~5.9% and ~8.6%, respectively.

Next, we’ll analyze Kinder Morgan’s capital expenditures over the last few quarters. We’ll also discuss its key upcoming projects.

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