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Kinder Morgan (NYSE:KMI) is a leading infrastructure company with a market capitalization close to $50 billion. The company has shown strong performance in its share prices since the 2020 crash, while consistently paying out a dividend of almost 6% and delivering robust shareholder returns.
Kinder Morgan 2Q 2024 Results
Kinder Morgan’s 2Q 2024 results revealed an EPS of $0.26 per share (P/E of 20 annualized) and DCF per share, resulting in a 10% yield for the company.
The company generated a significant $1.1 billion in DCF ($4.4 billion annualized), allowing for sustained long-term shareholder returns. The company’s DCF covers its nearly 5.6% dividend yield and leaves room for approximately $2.4 billion annualized for growth.
These impressive results solidify Kinder Morgan as a strong investment opportunity.
Kinder Morgan Infrastructure Portfolio
Kinder Morgan boasts one of the largest infrastructure portfolios in the country, primarily focused on natural gas.
With about 66 thousand miles of natural gas pipelines, moving around 40% of U.S. natural gas production, the company’s infrastructure plays a vital role in the market. Additionally, it possesses a significant interest in U.S. storage capacity, showcasing its strong integration within the industry.
Furthermore, the company operates as the largest U.S. independent refined product transporter and one of the leading CO2 transporters, emphasizing its diverse capabilities and reliable cash flow generation.
Kinder Morgan 2024 Outlook
Kinder Morgan’s outlook for 2024 is geared towards driving long-term shareholder returns.
Through acquisitions like STX Midstream for nearly $2 billion, dividend increases, and a $5 billion DCF budget, the company is primed to continue delivering double-digit shareholder returns off its DCF.
Despite a net-debt-to-adjusted EBITDA ratio of approximately $32 billion, with a ratio of 3.9x, the company remains well-positioned to manage its finances even in a higher interest rate environment.
Kinder Morgan’s 2024 outlook underscores its capability to sustain robust long-term shareholder returns.
Market Demand Growth
Kinder Morgan stands to benefit from a strong market demand, especially within the natural gas sector.
Expected expansion in U.S. production and supply growth by 2030 indicates substantial demand growth, particularly in natural gas, which aligns well with Kinder Morgan’s assets and growth potential.
Kinder Morgan Shareholder Returns
Kinder Morgan’s track record of leveraging its DCF effectively to generate shareholder returns is evident.
The company’s focus on capital spending, with a $3.3 billion capital program expected to be operational in 2024-2025, highlights its commitment to growth and delivering substantial returns. Additionally, an increase in annualized EBITDA from new assets will further boost DCF and enable dividend growth.
Kinder Morgan’s strategic utilization of cash flow positions it as a valuable long-term investment.
Thesis Risk
The primary risk to the thesis lies in Kinder Morgan’s dependency on long-term demand and evolving market trends. While demand for natural gas remains strong, uncertainties regarding future demand may impact the company’s ability to sustain long-term shareholder returns.
Conclusion
Kinder Morgan’s earnings reflect its ongoing success towards achieving $5 billion in DCF in 2024, with a double-digit DCF yield and strong asset portfolio. The company’s ability to maintain a near 6% dividend yield, coupled with significant capital investments, reinforces its attractiveness as a long-term investment.
The anticipated growth in EBITDA from new assets and subsequent DCF enhancement underscore the value of investing in Kinder Morgan for long-term gains, while the company’s prudent use of cash flow further solidifies its position as a sound investment.
