Kinder Morgan (NYSE:) caught our eye last year as a high-yield stock we might want to own. The company was emerging from a period of underperformance and reorganization and was looking forward to a favorable market environment. Value and yield aren’t quite what they used to be, but the stock is still a buy. Kinder Morgan trades at just 18 times earnings and pays what we consider a safe return of 5.6%. We say sure because the company is living within its cash flow limits, is budgeting appropriately, and the fundamentals of the business continue to be strong.
KMI Executive Chairman Richard D. Kinder said:
“The company got off to a good start this year and once again delivered strong earnings and strong dividend coverage this quarter. We continue to respect our cash flow, have reduced our debt by more than $11 billion since 2015 and expect this year to be the fifth consecutive year of increased dividends. In 2022, we plan to re-fund our expansion capital opportunities internally, meet or exceed our debt measurement target and return excess cash to our shareholders through an increase dividends and opportunistic share buybacks.
Sellers generally agree that this is a title to own. The consensus rating is a firm hold with an upward price target. The bad news is that Marketbeat.com’s consensus target assumes the stock is correctly priced at current price levels. The good news is that the consensus is up in the 12, 3 and 1 month comparison, and the high price target is the most recent. Two comments have been released since the Q1 report, including two price target increases and the high price target of $22, implying a 15% upside for the stock, and we believe this target will also increase over the next 12 months. .
Kinder Morgan beats in the first quarter, guides favorably
Kinder Morgan was expected to post year-over-year revenue and profit declines, but there is a one-time factor to consider. That factor was winter storm Uri, and the result is that revenues and profits fell much less than expected. Consolidated revenue was down 17.7% from a year ago but exceeded the consensus estimate by more than 1,100 basis points. Performance was driven by the strength of the and CO2 segments, and the outlook for these activities is firming up. In the end, the company reports earnings of $0.32, down from $0.60 last year, but $0.04 or 1,400 basis points better than expected.
“Excluding Uri-related earnings from our 2021 results, earnings per share for the quarter increased 17% and DCF per share increased 16% from the first quarter of 2021.”
Kinder Morgan raises its 2022 dividend
Kinder Morgan increased its dividend by 3% in the quarter, bringing the yield to 5.6%. This is the 5th consecutive increase for the company and not the last of the balance sheet, results and prospects have nothing to do with it.
As for the chart, KMI shares have been trending higher since December 2022 and are on track to continue this trend. The premarket stock has already pushed the stock up another 1% and is trading at $19.97 and the highest level since the pandemic began. Assuming the market continues to rally, we see this stock hitting a new high and moving higher as the year progresses. In this scenario, the next resistance target is near $22.