KMI

[ronn38]

I'm gonna watch for a while, but I think this could be the value investors dream come true. I sold out of my KMI at a moderate loss, but before the blood really let (used the proceeds to buy EPD today). KMI's assets are there; and hopefully soon much less encumbered by debit. No-the-less, I feel your sting of substantial capital loss (felt it on LINN and on VNR when I jumped ship).

I'm thinking of picking up about 45 shares of MMP tomorrow (if it stays in the low end of $57), bring me to a 1/2 position.

Ronn

[rapidacid]

I agree with everything Eric said. 

I plan to add 30% to my position over the coming days / weeks / months

[navyasw02]

(12-08-2015, 05:16 PM)EricL Wrote: Dividend cut sucks, but in the long run is the best choice of action for the company and for shareholders.

Frees up $3.37B ($1.51x2.23B shares) in annual cash flows which it can use to fund growth projects and pay down debt. This allows the company to maintain its investment grade credit rating while also avoiding selling off assets at distressed prices to meet cash flow needs.

Could be a tremendous buy if it drops much further. At a $15 share price it would trade at just 6.7 times the forecast DCF of $5B and would also yield 3.3%, which I would expect to see a return to growth in the future once the balance sheet is cleaned up.

The business remains the same as it was at $40 earlier this year and is producing plenty of cash flow. The company simply got ahead of itself with dividend payments and their high leverage caught up to them.

At 3.3% yield, what would be the point?  People only liked it because it was a dividend cash cow.  Why not go with XOM at about 4% yield and a AAA rating and save the heartache?

[EricL]

(12-08-2015, 11:52 PM)navyasw02 Wrote:

(12-08-2015, 05:16 PM)EricL Wrote: Dividend cut sucks, but in the long run is the best choice of action for the company and for shareholders.

Frees up $3.37B ($1.51x2.23B shares) in annual cash flows which it can use to fund growth projects and pay down debt. This allows the company to maintain its investment grade credit rating while also avoiding selling off assets at distressed prices to meet cash flow needs.

Could be a tremendous buy if it drops much further. At a $15 share price it would trade at just 6.7 times the forecast DCF of $5B and would also yield 3.3%, which I would expect to see a return to growth in the future once the balance sheet is cleaned up.

The business remains the same as it was at $40 earlier this year and is producing plenty of cash flow. The company simply got ahead of itself with dividend payments and their high leverage caught up to them.

At 3.3% yield, what would be the point?  People only liked it because it was a dividend cash cow.  Why not go with XOM at about 4% yield and a AAA rating and save the heartache?

Because this is a temporary event, and KMI remains a cash cow, just not a high yield one at the moment. An investor who buys tomorrow (likely under $15), will be paying less than 7 times distributable cash flow for the company. For example, with a $15 share price you'd be paying 6.7x DCF ($15*2.23B shares / $5B). The KMI business itself hasn't changed since yesterday, just the income yield it is giving to shareholders at the moment.

Looking strictly at income, you are right that XOM is a much easier stock to hold and at a AAA credit rating, is about the only SWAN stock in the sector at the moment. However, there are more to returns than income alone, and for value investors who are looking for potential long term capital gains, I think there is a pretty good chance of seeing those in the future with KMI.

KMI is doing what it needs to do to fund the growth capex it feels necessary for the long-term benefit of the business. Due to the drop in share price it can't sell shares to raise funds, and due to its high debt load and falling equity it can't float any more debt to fund projects without getting a credit downgrade that would drop it below investment grade. Again, this 75% dividend cut will free up roughly $3.4 billion in cash flow that was previously going to the dividend to now instead go towards capex and paying down debt. Once the balance sheet gets shored up and crude prices recover I expect the dividend growth to continue.

[KenBob]

The payout ratio is now down to where it looks good. Soon as the debt levels are reduced, I will seriously consider buy some KMI.

[rapidacid]

Insider buying in December and January is what we want to see

http://insiders.morningstar.com/trading/insider-activity.action?t=KMIion=usa&culture=en-US

[DividendGarden]

KMI has changed from an income stock to a value stock for now.

[Rasec]

It's up almost 5% this morning.

[DividendGarden]

(12-09-2015, 09:39 AM)Rasec Wrote: It's up almost 5% this morning.

up over 8% now, at $17.03.

[crimsonghost747]

I was expecting a 50% cut in dividend... simply because I was afraid that the company will fear shareholder reaction if cutting it more than that.

But I did promise myself I would take a long hard look at the company if they cut the dividend by 75% or more, which I think was absolutely necessary. Well they did reach the 75% so I'll be taking a look during the weekend now that the more imminent problems have been solved.

[stewardinlife]

As a relatively new member who has started my own journey in DGI stocks (started in around June of this year, with around 20K so so far), I have 50 shares in KMI. I am not completely sure if I want to add more.

Based on some rules that are widely believed (there is wisdom in it), one of them is look for stocks that have raise divs for 25+ years, and I think KMI doesn't necessarily fall in this. The other interesting point about KMI is, I've read here: http://ir.kindermorgan.com/press-release...1-share-16
they've stated in October: "We currently expect to increase our declared dividend for 2016 by 6 to 10 percent over the 2015 declared dividend of $2.00 per share. We expect this range will provide the flexibility for us to meet our dividend and have excess cash coverage"

Wouldn't they know that in October they may have some idea that there is going to be some div cuts?

[DividendGarden]

(12-09-2015, 06:55 PM)stewardinlife Wrote: The other interesting point about KMI is, I've read here: http://ir.kindermorgan.com/press-release...1-share-16
they've stated in October: "We currently expect to increase our declared dividend for 2016 by 6 to 10 percent over the 2015 declared dividend of $2.00 per share. We expect this range will provide the flexibility for us to meet our dividend and have excess cash coverage"

Wouldn't they know that in October they may have some idea that there is going to be some div cuts?

That's exactly what gives us pause.  First they said 10% annually for five years, then they changed it to 6-10%, then they cut 75%.  I don't mind the cut, I think that's what they needed to do, but what concerns me is they make me feel like they don't have their finger on the pulse of the company.