Why Kinder Morgan Stock Outperformed in the First Half of 2022

What occurred
Shares of Kinder Morgan (KMI -0.68%) gained 5.7% in the first half of 2022, in accordance with knowledge supplied by S&P Global Market Intelligence. While that may not appear spectacular, it was contemplating that the S&P 500 tumbled almost 21% throughout that interval.
Here’s a take a look at what has fueled the pure gasoline pipeline firm’s outperformance thus far this yr.

So what
Kinder Morgan received 2022 off to an incredible begin. The pure gasoline pipeline firm generated $1.5 billion of distributable money stream throughout the quarter. While that was effectively beneath the prior-year interval’s determine, that is fully because of Winter Storm Uri’s constructive influence in 2021. After adjusting for that one-time occasion, Kinder Morgan’s monetary outcomes have been forward of the year-ago interval. Overall, the firm generated sufficient money to cowl its high-yielding dividend and full enlargement program with room to spare.
That enabled Kinder Morgan to extend its dividend by 3%, its fifth consecutive yr of rising the payout. Kinder Morgan provides earnings buyers a 6.5% dividend yield at the present share value.
Kinder Morgan additionally made progress on new progress initiatives. The firm secured sufficient buyer commitments to maneuver ahead with a renewable diesel hub mission in Southern California. It expects to complete this mission early subsequent yr.
Kinder Morgan and its companions additionally made a closing funding determination to develop their Permian Highway Pipeline after receiving sufficient buyer commitments. The firm expects to complete that mission by November of 2023, which can give it extra gas to doubtlessly develop the dividend in the future. It’s engaged on one other pipeline enlargement mission in that area and a larger-scale pipeline improvement to drive further future progress.
Analysts have appreciated what they’ve seen from Kinder Morgan. Several have upgraded the inventory and raised their value goal this yr. For instance, Wells Fargo analyst Michael Blum upgraded shares from underweight to equal weight whereas boosting the financial institution’s value goal from $19 to $21 a share. The analyst believes Kinder Morgan may gain advantage from a number of tailwinds, together with new pure gasoline pipeline and LNG export initiatives.
Now what
Kinder Morgan’s pure gasoline pipeline operations proceed to generate heaps of money, giving it the cash to pay a high-yielding dividend whereas increasing its operations. Those enlargement initiatives will present it with additional cash stream, enabling Kinder Morgan to steadily enhance its dividend. That makes it a superb possibility for buyers in search of to gather passive earnings.

Wells Fargo is an promoting companion of The Ascent, a Motley Fool firm. Matthew DiLallo has positions in Kinder Morgan. The Motley Fool has positions in and recommends Kinder Morgan. The Motley Fool has a disclosure coverage.


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