Here's How Kinder Morgan Inc. Keeps the Growth Train Rolling

Source: Kinder Morgan Investor Presentation.

Not only does this acquisition add additional terminal sites to Kinder Morgan's portfolio, but one of the terminals it's acquiring is in Houston, immediately adjacent to the company's Galena Park Terminal complex. That enables the company to expand its presence in the region by just moving its fence, so to speak.

However, the other important aspect of the deal is the embedded growth it's acquiring. This comes in two forms. First, one of the terminals it's acquiring in North Carolina isn't currently operating, so once that facility is up and running, it will add to Kinder Morgan's income stream. On top of that, the company picked up an undeveloped site at Perth Amboy in New Jersey that has waterfront access. This site--which is close to the key New York City market--can be developed in the future to serve the region's growing demand for energy.

Building a bigger backlog

A lot of Kinder Morgan's recent deals have taken this two-step approach of being immediately accretive to earnings while also adding incremental future growth potential. The Bakken midstream deal, for example, came with built-in growth from a pipeline that's currently under construction. Another example is a deal the company made in late 2013, when it bought two Jones Act Tanker companies that controlled a dozen vessels. However, at the time of the deal, just seven were in service; the other five were under construction. That said, the seven that were operational brought in enough cash flow to make the deal immediately accretive, while the new vessels would provide a further boost to the company as they entered service.

Source: Kinder Morgan.

By acquiring assets with built-in growth opportunities, Kinder Morgan is able to add to its backlog of visible growth opportunities as well as its so-called shadow backlog of potential projects. This really provides it with a lot of visibility to raise its dividend in the future, as it knows where a bulk of its future growth will come from since it has ample growth outside of any future acquisitions.

Investor takeaway

Kinder Morgan continues to be very strategic when it makes an acquisition. It's looking not just to move the needle a little bit right off the bat, but also seek upside to move the needle in the years ahead. This dual approach to growth should help ensure Kinder Morgan's growth doesn't begin to slow.

How to invest in the technology fueling the U.S. energy boom

As the price of oil plummets, savvy investors are looking for a way to invest in this new energy dynamic. And there's one high-caliber company in the oil-services sector using advanced technology to profit from the U.S. oil boom. Given the country's ongoing quest to extract more and more oil, I strongly urge you to claim your copy of our brand-new investigative report on this company helping fuel its boom. Simply click here for access .

The article Here's How Kinder Morgan Inc. Keeps the Growth Train Rolling originally appeared on

Matt DiLallo has the following options: short January 2016 $32.5 puts on Kinder Morgan and long January 2016 $32.5 calls on Kinder Morgan. The Motley Fool recommends Kinder Morgan. The Motley Fool owns shares of Kinder Morgan. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .

Copyright © 1995 - 2015 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy .

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

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

In This Story


Other Topics


Latest Markets Videos

The Motley Fool

Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

Learn More