Last update on 2024-06-28

Kinder Morgan (KMI) - Dividend Analysis (Final Score: 3/8)

Assess Kinder Morgan (KMI) dividend policy with an 8-criteria scoring system. Get insights into performance and stability. Final Score: 3/8.

Short Analysis - Dividend Score: 3

We're running Kinder Morgan (KMI) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

Dividend yield measures the ratio of a company's annual dividend compared to its share price. It is important as it indicates the return shareholders receive from dividends alone, relative to their investment.

Kinder Morgan (KMI) boasts a dividend yield of 6.3889%, which surpasses the industry average of 5.53%. Historically, KMI's dividend yield has experienced significant fluctuations, reaching a peak at 12.9357% in 2015 following a stock price drop to $14.92, before stabilizing in recent years. The current higher-than-average yield suggests KMI provides more income per dollar invested compared to its peers. However, while attractive, this elevated yield must be interpreted with caution; it can result from a dropping stock price rather than increasing dividend payouts alone. As KMI's recent stock prices show relative stability, this trend is a positive indicator for income-focused investors.

Average annual Growth Rate higher than 5% in the last 20 years?

The Dividend Growth Rate reflects the annualized growth rate of the dividend paid to shareholders over a specific number of years and indicates the company's ability to increase its payouts.

The dividend growth trend for Kinder Morgan (KMI) shows significant volatility over the past 20 years. Specifically, the dividend per share ratio numbers range widely from -74.09% to 129.73%. The average dividend ratio over these years stands at 7.79%. While this number is above the 5% threshold, the considerable fluctuations and periods of negative growth cast some doubt on the sustainability of consistent dividend growth. Particularly notable are the years with negative growth, such as -74.09% in 2016 and -8.24% in 2013, which detract from the overall positive trend. Therefore, although the average indicates a decent growth rate, the inconsistency could be a red flag for dividend stability.

Average annual Payout Ratio lower than 65% in the last 20 years?

The payout ratio is a key measure of the proportion of earnings a company distributes to shareholders as dividends. The industry benchmark suggests a payout ratio below 65% to ensure sustainability and reinvestment.

Kinder Morgan's (KMI) average payout ratio over the last 20 years is substantially higher, at approximately 293.7%. In most of these years, the payout ratio exceeded the recommended threshold of 65%, with some years like 2020 reaching extremely high levels (over 1975%). This indicates a high-level risk of dividend sustainability since a payout ratio significantly above 100% means the company is paying out more in dividends than it earns, potentially affecting financial stability long-term. Consequently, this excessive payout ratio trend is detrimental for Kinder Morgan's dividend sustainability.

Dividends Well Covered by Earnings?

Dividends being covered by earnings means that a company is generating enough profit to afford its dividend payments. This is key to assessing dividend sustainability.

Analyzing the data from 2003 to 2023, we can see significant fluctuations. Initially, from 2003 to 2007, there were no dividends, so coverage was irrelevant. In 2008, a significant negative EPS (-18.1848) indicated very poor performance. Post-2009, KMI shows varied EPS and DPS numbers. For example, in 2012, the dividend coverage ratio was 7.31, suggesting strong performance. However, ratios like 2015 (16.72) indicate extremely inconsistent earnings vs. dividends, raising concerns. Overall, the trend shows a discontinuous but relatively stable increase from 2016, reaching around 1.05 by 2023. The observed stability from 2016 suggests KMI is on a better path. However, the drastic variations beforehand question long-term reliability. Hence, while recent years seem positive, the earlier volatility remains a cautionary signal.

Dividends Well Covered by Cash Flow?

Dividends covered by cash flow measure how well a company's free cash flow covers its dividend. A coverage ratio above 1 suggests that the company is generating enough cash to cover its dividend payments, indicating financial health.

From 2009 onwards, we see a significant improvement in Kinder Morgan's free cash flow, starting from $263 million in 2009 to $4.146 billion in 2023. However, when comparing this to the dividend payout amount, we observe some volatility. The dividend coverage ratio varied distinctly year-on-year. Notably, during 2013, 2014, and 2015, the coverage ratios were 2.33, 2.07, and 3.00, respectively, indicating very healthy levels of coverage; meaning that KMI had more than twice the amount in free cash flow needed to cover its dividends. Despite this, other years like 2010 (0.77), 2016 (0.66), and 2018 (0.84) saw lower coverage ratios below 1, which is a potential red flag as it indicates that the dividends paid out exceeded the free cash flow. Post-2020, we see moderate coverage ratios (hovering around 0.6 to 0.85) suggesting a level of risk in terms of insufficient cash flow coverage. Current trends show free cash flow exceeding dividend payouts in absolute amount but not consistently in coverage ratios. This mix of high and low coverage ratios suggests a cautious but optimistic outlook – while there are strong years, the inconsistency might warrant further due diligence and monitoring, particularly in weaker coverage years.

Stable Dividends Since the Company Began Paying Dividends?

Stable Dividends Over the Past 20 Years examines whether the company has consistently paid dividends, without a drop of more than 20%. This stability is crucial for income-sensitive investors in ensuring predictable income.

From the data provided, it is observed that until 2015, dividends remained stable or showed slight increases. However, in 2016, dividends dropped from $1.93 to $0.50, a significant reduction of approximately 74%. Despite this, in recent years KMI has shown a steady recovery with dividends increasing from $0.50 in 2017 to $1.127 in 2023. This trend indicates that after the severe cut in 2016, management has prioritized returning to a stable and growing dividend policy, which is favorable for long-term income investors.

Dividends Paid for Over 25 Years?

Dividends Paid for Over 25 Years looks at a company's ability to consistently return value to shareholders over an extended period, reflecting financial stability and shareholder commitment.

Analyzing Kinder Morgan's (KMI) dividend history from 2000 to 2023, it's notable that dividends were only introduced in 2011. This means KMI hasn't consistently paid dividends for 25 years, which could be seen as a drawback in terms of long-term dividend sustainability. However, the dividend growth from 0.74 in 2011 to 1.127 in 2023 showcases a favorable upward trend, indicating KMI's improving financial health and commitment to returning value to shareholders. The reduction in dividends in 2016 to 0.5 reflects financial restructuring or adverse conditions, but subsequent recovery indicates resilience. Overall, while the absence of 25 years' history is a drawback, recent trends are promising.

Reliable Stock Repurchases Over the Past 20 Years?

reliable stock repurchases over the past 20 years?

Analyzing Kinder Morgan's (KMI) stock repurchase trend over the past 20 years requires scrutinizing the historical data. During the last 20 years, KMI has shown significant share increases until around 2013, where a moderate drop in shares began showing reliability in buybacks. In 2008, the number of shares increased dramatically from 0 to 197,929,527, continuing till nearly 2.2 billion shares by 2022. Until 2023, the firm has however managed to stabilize its repurchases trend by steadily reducing shares especially from 2018, 2020, and 2022 years. The significant average repurchase rate over the past 20 years has been observed at around 32.0273%. With data indicating that stock buybacks are executed somewhat reliably, the number of repurchase efforts shows sustainable management emphasis towards stabilizing shareholder value, which displays a robust trend.