EUR 850.00 For Business Accounts Only

Morningstar | Kinder's Strong Cash Flow Supports Dividend Growth Trajectory

Kinder Morgan Inc. is now one of the largest midstream energy firms in North America after the massive consolidation in 2014 that rolled up Kinder Morgan Energy Partners, Kinder Morgan Management, and El Paso Pipeline Partners.Chairman Rich Kinder built the pipeline juggernaut out of Enron's unwanted midstream assets in the late 1990s. Now Kinder Morgan has fingers throughout the midstream energy value chain in natural gas, natural gas liquids, oil, liquefied natural gas, and carbon dioxide markets in the United States and Canada.The company's U.S. gas pipeline business is particularly impressive. It claims its daily gas transportation capacity is equivalent to 40% of all U.S. gas consumed, although this market share varies by region and season. Kinder is dominant mostly in the central southern and Southeast U.S. but has pipelines that serve most major U.S. gas supply and demand regions. It is well positioned in the major U.S. shale gas regions to work with producers and off-takers.Kinder Morgan's size is both an opportunity and a challenge. Its expansive asset footprint provides numerous opportunities for investment if supply or demand bottlenecks develop. Kinder has the financial heft and industry relationships to execute any project, no matter the size. However, Kinder's size limits its ability to grow at the same rate as smaller peers. We expect 3%-4% EBITDA growth beyond 2020.Kinder has ample cash and balance sheet capacity to keep its dividend growing faster than core earnings for several years. With the sale of the Trans Mountain Pipeline in mid-2018 and elimination of nearly $6 billion of planned investment, Kinder should have plenty of cash for share buybacks, debt reduction, and dividend increases even with incremental investment opportunities.Kinder faces long-term commodity price risk to the extent that rising or falling oil and gas prices impact systemwide volumes and capacity demand. A sharp price drop could strand some of its assets and stall growth. A sharp increase in energy prices could offer additional growth opportunities.