Energy

Kinder Morgan Earnings Accompanied by Dividend Hike to New Milestone

Jon C. Ogg

Published: April 17, 2019 4:28 pm

Last Updated: January 30, 2020 9:54 pm

Kinder Morgan Inc. (NYSE: KMI) has released its first-quarter earnings for 2019, along with an update on its Permian Basin projects and news of a dividend hike that reached an enticing milestone.

The oil and gas infrastructure giant reported net income available to common stockholders of $556 million in the first quarter of 2019, up from the $485 million in the first quarter of 2018. The company’s distributable cash flow rose 10% to $1.371 billion over the same period. Its earnings per share of $0.24 was above the $0.22 reported a year ago and Refinitiv showed a consensus analyst earnings estimate of $0.24 per share. Kinder Morgan’s distributable cash flow per share grew by 7% to $0.60.

Kinder Morgan continued to fund most of its growth capital through operating cash flows, and the company also paid down $1.3 billion of maturing bond debt with its proceeds from the return of capital distribution from the Trans Mountain sale.

The board of directors approved a cash dividend of $0.25 per share for the first quarter. That $1.00 dividend represents a 25% increase over the fourth quarter 2018 dividend, and dividend-oriented investors will notice a new milestone on the yield.

Richard D. Kinder, executive chairman of Kinder Morgan, said:

We are pleased to continue the dividend growth plan that we outlined to shareholders during the summer of 2017. We continue to maintain a strong balance sheet and have been upgraded by two of the three ratings agencies. We are well positioned for a successful 2019 and remain on positive outlook for an upgrade by Fitch later in the year.

The company also continued to make progress on two projects in the Permian Basin. This covered the Gulf Coast Express and Permian Highway Pipeline projects, as well as its Elba Liquefaction facility, Kinder Morgan also reached settlements with shippers on both Tennessee Gas Pipeline and El Paso Natural Gas and should resolve the vast majority of its 501-G (effectively to provide a rough estimate of a pipeline’s return on equity) exposure.

Kinder Morgan also updated its project backlog, as follows:

KMI’s project backlog for the first quarter stood at $6.1 billion, approximately $400 million more than the fourth quarter of 2018, with additions of approximately $600 million in new projects, primarily in the Natural Gas Pipelines segment, offset by approximately $200 million in projects placed in service and other project capital adjustments. Excluding the CO2 segment projects, KMI expects projects in the backlog to generate an average Project EBITDA multiple of approximately 5.5 times.

Kinder Morgan Will now have slightly better than a 5% dividend yield after closing down 0.6% at $19.69 ahead of earnings. The after-hours reaction was mixed on the shares, and the 52-week trading range is $14.62 to $20.44.