Kinder Morgan Inc. (NYSE: KMI) reported second-quarter 2016 results after markets closed Wednesday. The midstream giant posted earnings per Class P share (EPS) of $0.15 per share on revenues of $3.14 billion. In the same period a year ago KMI posted EPS of $0.15 on revenues of $3.46 billion. Consensus estimates called for EPS of $0.15 and revenues of $3.45 billion.

The company said it would pay a $0.125 quarterly dividend for the quarter and expects its full-year dividend to total $0.50. Kinder Morgan intends to use its cash in excess of dividends “to fund growth investments and strengthen its balance sheet.” That is consistent with the company’s earlier comments and proves that our speculation that Kinder Morgan might raise its dividend was too aggressive.

Distributable cash flow (DCF) is a non-GAAP measure that is roughly comparable to net income per share and is KMI’s preferred way of comparing basic cash flows to the cash dividends it expects to pay shareholders. Another way of looking at DCF is as coverage in excess of dividends.

DCF for the second quarter totaled $0.47 per share, down from $0.50 in the year-ago quarter and down from $0.58 sequentially. The drop was attributed to lower contributions from the CO2 segment (where Kinder Morgan accounts for oil and gas production) primarily due to lower commodity prices, higher preferred stock dividends and higher cash taxes, partially offset by increased income from the products pipelines and terminals segments and lower interest expense.

DCF for the quarter totaled $1.05 billion compared to $1.1 billion in the second quarter last year. Net income for the second quarter totaled $375 million compared with $348 million in the year-ago quarter. The increase was due to a gain of $31 million in certain items including a $39 million payment related to early termination of a storage contract.

Executive chairman Richard Kinder had this to say about the results:

We are pleased to have taken substantial steps towards achieving our stated goals of strengthening our balance sheet and positioning the company for long-term value creation. … [W]e expect to end the year at a leverage ratio of 5.3 times net debt-to-Adjusted EBITDA, down from our previous guidance of 5.5 times. We are now closer to reaching our targeted leverage level, which will position us to return substantial value to shareholders through some combination of dividend increases, share repurchases, attractive growth projects or further debt reduction.

Kinder Morgan’s current project backlog is valued at $13.5 billion, down from $14.1 billion at the end of the first quarter.

Consistent with guidance provided at the end of the last quarter, Kinder Morgan continues to expect Adjusted EBITDA to be about 3 percent below budget and distributable cash flow to be about 4 percent below budget, excluding the effect of the recent transaction with Southern Company. The company also forecasts growth capital a $2.8 billion in 2016, a decline of $500 million from its budgeted total of $3.3 billion.

Investors are not thrilled with what Kinder Morgan delivered this afternoon. There were no positive surprises and the shortfall in revenues is not encouraging. Analysts had set the bar pretty low, but the company couldn’t quite clear it anyway. Who knows, maybe a little boost in the dividend would have made the difference?

Shares traded down about 2% in the after-hours session at $22.09 in a 52-week range of $11.20 to $35.92. The consensus price target on the stock was $21.68 before today’s earnings announcement.

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