Kinder Morgan (
CEO Robert Kinder bought $27 million of his company's stock on
Dec. 18 when shares traded at $33.
Less than one month later, the company announced a healthy 11%
increase of its quarterly dividend payment.
The combination of insider buying and a
is great news for Kinder Morgan investors.
Despite being No. 39 on Forbes' list of the richest Americans,
Robert Kinder isn't well known outside of Texas. He was buddies
with Enron founder Ken Lay and served as Enron President from
1990 to1996. But unlike Lay, Kinder was able to avoid prison and
built a real and profitable oil and gas company. Along the way,
he's grown his net worth to $10.2 billion.
Kinder Morgan owns and operates oil and gas pipelines through
its subsidiaries. It is a managing partner that controls
Kinder Morgan Energy Partners (
), El Paso Pipeline Partners (
Kinder Morgan Management (
three companies that are involved in the distribution and
processing of oil and natural gas.
Kinder Morgan's services are essential to companies drilling
and fracking for
. These companies may be able to locate and extract oil from the
ground but without Kinder Morgan they wouldn't be able to
efficiently transport the oil to refineries and other processing
One of Kinder Morgan's largest holdings is a 111-mile pipeline
running through the heart of the Eagle Ford Shale region. The
pipeline carries natural gas from the region's extraction sites
to processing facilities, which are also owned by Kinder
Such full-service pipeline operations are what make Kinder
Morgan the logical choice for large natural gas producers
operating in the area, including
Chesapeake Energy (
And thanks to the significant cash flow generated by its
subsidiaries, Kinder Morgan pays a healthy, reliable and growing
dividend. Over the last three years, the dividend has surged
With a current yield of 4.9%, Kinder Morgan is a high-yield
Exxon Mobil (XOM)
, for example,
only offers its shareholders a 2.8% yield.
All of this may sound like great news. But the stock took a
hit in early December after disappointing guidance from one of
its subsidiaries. It was at those depressed levels that the
company's CEO, Robert Kinder, invested $27 million in Kinder
Morgan stock. While shares enjoyed a 10% bump on the news, the
price has since fallen back to pre-announcement levels.
Kinder Morgan's profitability has little to do with gas
prices. The company offers "midstream" services, which means that
Kinder Morgan isn't involved in extracting the resource and isn't
selling it to the end consumer. Therefore, Kinder Morgan's
network of pipelines and processing facilities is profitable
anytime that oil and gas are flowing through them.
Based on steady demand and the long-term commitments Kinder
Morgan has secured from large oil and natural gas producers, the
company's business model is rock solid.
Despite being a dividend champion, Exxon Mobil's 2.8% dividend
seems paltry next to Kinder Morgan's 4.9% yield. And with a
proven track record for dividend growth, Kinder Morgan is poised
to make investors a lot of money.
The median of analyst predictions suggests that Kinder Morgan
shares will rise by over 15% this year. Between that share
appreciation and the 5% dividend, your annual return could be
20%. In an environment where major
are expected to be flat, that is tremendous performance. Still,
the stock is 22% below its 52-week high and has the potential to
return to those levels.
Investors search for opportunities to own dividend growth and
undervalued stocks. With Kinder Morgan, you can own both at a
price that was attractive to the person who should know best, its
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