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he earnings results for Kinder Morgan’s (KMI) first quarter were in line; it’s 60% increase in the annual dividend was more aggressive than expected.
Adjusted EBITDA (earnings before interest payments, taxes, and depreciation) was $1.90 billion for the quarter, slightly ahead of the Wall Street consensus of $1.87 billion. Distributable cash flow–arguably the most important number for investors who hold this stock for its dividend–climbed to $1.25 billion, above consensus estimates.
The company announced that it would raise its dividend 60% to an annual 80 cents a share with a first quarter dividend of 20 cents a share That puts the forward annual yield at 4.86% on the April 20 closing price of $16.47. Kinder Morgan is a member of my Dividend Portfolio and I will continue to hold the stock in that portfolio. The shares are down 7.26% since I added them to that portfolio on February 24, 2016.
Looking a little beyond this quarterly report, Kinder Morgan reported that it had put $700 million in new pipeline, gathering, and terminal projects into operation in the quarter. At the same time Kinder Morgan added $900 million of new projects to its backlog. Which means that the company has plenty of investment opportunities ahead of it that can grow distributable cash flows.
The majority of the new projects–about 90% of additions–are focused on natural gas. Natural gas was the driver for first quarter results as well. Transport volumes rose 10% from the first quarter of 2017, and volumes of natural gas and crude gathered climbed 1% and 3%, respectively. The company signed up 1.2 billion cubic feet of capacity on its El Paso natural gas line out of the Permian Basin and the remaining capacity on its  2 billion cubic feet a day Gulf Coast Express project. Earnings in the natural gas pipelines segment rose 6% year over year in the quarter.
Kinder Morgan still carries a large amount of debt–$37 billon at the end of the first quarter. That’s $37 million higher than at the end of 2017, but it is $5.8 billion lower than at the end of the first quarter of 2015.
The company continues to buy back shares with the purchase of $250 million in stock during the quarter.
The company told Wall Street analysts during its conference call that it doesn’t expect any impact from new rule-making at the Federal Energy Regulatory Commission until after 2020 and that the likely impact will be about $100 million in lower prices on some transmission contracts.