Stock Pick Of The Week: Kinder Morgan Energy Partners, L.P. (KMP)

By
A A A

Three reasons to buy Kinder Morgan Energy Partners, L.P.:

  1. High dividend yield of 6.98%
  2. Heavy insider buying of beneficial owner, Kinder Morgan Inc.
  3. Trans Mountain Pipeline is alternative to the controversial Keystone XL Pipeline

Kinder Morgan Energy Partners, L.P. (KMP) is the general partner of a partnership which was formed to acquire, own and operate three pipeline systems which transport natural gas liquids, petroleum products and carbon dioxide. The partnership also owns a natural gas processing plant. KMP has a bullish Chaikin Power Gauge rating driven by bullish expert opinions in our model. This is based on analysts raising their earnings estimates and opinions on KMP and strong insider buying.

The company has a 6.98% dividend yield, having recently raised their dividend by 6.2%.

America is becoming energy independent thanks to natural gas. Kinder Morgan as an established pipeline company is in an excellent position to benefit from the infrastructure needed to move national gas from the source, be it Canadian or U.S. based, to processing facilities. They have many new pipeline construction projects in progress, including an expansion to their Trans Mountain Pipeline based in the Rocky Mountains.

This expansion while controversial and opposed by a small but vocal minority in Canada, is a viable alternative to the politically controversial Keystone XL Pipe-line and can transport the immense increase in Canadian crude oil from shale expected over the next 3 years. While approval for expansion is by no means assured, KMP is not relying solely on the large scale project but is also planning expansion of its natural gas pipeline system in the U.S. Transporting LNG by railroad is subject to environmental risk and thus a counterpoint to any opposi-tion to the Trans Mountain expansion.

Kinder Morgan Energy Partners has been under performing its competitors but yields substantially more. Both Deutsche Bank and Goldman Sachs have recently reiterated their buy signals in KMP.

However, the most compelling supplement to our bullish Chaikin Power Gauge rating is the heavy insider buying in Kinder Morgan Inc., the beneficial owner of KMP which derives over 80% of its dividend flow from KMP. This buying came from founder Richard Kinder and savvy Houston investor Fayez Sarofim, who purchased over $50 million of stock in KMI over the last 6 months.

The bullish Chaikin Power Gauge rating, the 7% dividend yield and the savvy in-sider buying point to a buy for Kinder Morgan Energy Partners, L.P. as a high yield capital gains-oriented play on the growing trend toward energy independence in the United States.

KMPKMP

Plus:

Chaikin Analytics

No Risk Trial

NASDAQ Launches NASDAQ Chaikin Power Indexes based on the Chaikin Power Gauge rating




The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas , Business , Stocks

Referenced Stocks: KMP

Marc Chaikin

Marc Chaikin

More from Marc Chaikin:

Related Videos

Stocks

Referenced

Most Active by Volume

19,087,008
  • $18.149 ▲ 0.94%
9,556,700
  • $114.4361 ▲ 0.39%
8,073,932
  • $96.91 ▲ 3.33%
7,834,071
  • $7.46 ▲ 0.67%
6,954,092
  • $105.10 ▲ 0.06%
6,241,937
  • $7.4534 ▲ 0.86%
5,727,260
  • $15.64 ▲ 1.23%
4,973,474
  • $80.12 ▼ 0.81%
As of 12/29/2014, 10:42 AM


Find a Credit Card

Select a credit card product by:
Select an offer:
Search
Data Provided by BankRate.com