| Best of the Best: Today's Top Investment Ideas |
| Kinder Morgan (KMP): Pipeline profits |
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| Monday, 29 September 2008 | |
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“Kinder Morgan is one of the largest publicly traded pipeline master limited partnerships (MLP) in America, owning or operating more than 25,000 miles of pipelines and over 100 terminals. “The company charges a fee based on the volume of product transported, not the prevailing market price. Even better, no competition exists. Since new pipelines require regulatory approval and significant cost outlays, there’s virtually no duplication of routes. “Add it up, and KMP enjoys steady and predictable cash flows. Cash flows, thanks to its structure as a MLP, it is required to pass through to investors. At current prices and projected distribution rates, KMP is yielding a healthy 7.5%. “Among pipeline MLPs, we’re convinced KMP is the safest and most attractive. It’s the largest in terms of market cap, at roughly $13.8 billion. It boasts an unmatched footprint, making it vital to the energy industry. “Most importantly, though, founded in 1992, KMP is one of the oldest pipeline MLPs. And that allows us to evaluate its performance over a range of oil prices to get an idea of what to expect moving forward. “Since 1996, KMP has handed investors an average annual return of 28%. Thanks to a disciplined expansion strategy (that calls for funding growth with no more than 50% debt), it’s also been able to increase the distribution by an average of 17% per year “And the recent results only instill further confidence. Quarterly earnings checked in ahead of expectations at $362.2 million, representing a 56% increase. So by all means, keep buying.” |
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