Tracking Dividends: Kinder Morgan Energy Partners, L.P. (KMP)

Kinder Morgan Energy Partners LP (NYSE: KMP) expects to increase its third quarter cash distribution to its limited partners to $1.02/common unit. That’s 16% more than the cash distribution of $0.88/unit for the third quarter of 2007.  Many MLP’s are in unique positions in today’s economy and some of these dividend payments appear safer than elsewhere in the market.

What allows Kinder Morgan (and other master limited partnerships) toswim against the tide of lowered or eliminated dividends is itspartnership status and its regulated rates on pipeline transportation.Even as less gasoline is moving through pipelines, natural gas flowsare increasing. And while it’s nearly impossible to discern the exactrates paid by shippers, for the most part transportation rates arerecoverable in end-user pricing.

The pipeline partnerships’ share prices have fallen sharply since thefirst of September, down more than 30% from 52-week highs. That isprobably mostly due to anxiety about the world’s economy. As cashmachines, the pipeline partnerships are still capable of spinning outnice piles of cash.

Paul Ausick
October 8, 2008