One of the widest held securities by the individual investor declined 30% this week alone. Kinder Morgan, the 3rd largest energy company in the U.S. issued a press release today that was read wrong by the market. Several twitter posts indicate that Kinder said the dividend was for grabs. Their press release in my opinion was issued to reassure the market but may have had the opposite effect instead, spooking investors instead of reassuring them.
Kinder Morgan Announces 2016 Financial Expectations
“In its third quarter earnings call, Kinder Morgan, Inc. (NYSE: KMI) indicated an expected 2016 growth range of 6 to 10 percent over its 2015 target dividend of $2.00 per share. KMI has now completed its 2016 budget process and expects to generate 2016 distributable cash flow of slightly over $5 billion, which would be sufficient to support dividend growth in the range discussed in the third quarter call. Alternatively, this cash flow can be used to fund some or all of KMI’s equity needs for 2016. KMI’s board will be reviewing the dividend policy and financing plans in the coming days and the company will announce that policy and plan when finalized. KMI will construct its 2016 plan to maintain an investment grade rating with all three agencies. Further KMI does not plan to issue equity at current prices.”
I read that to understand they the Company is saying the increase in the dividend is in jeopardy, not the dividend itself. The key phrase is “support dividend growth” . Lots of market participants read this to mean that the cash flow might not be used for dividends at the same rate or at all. Were they deliberately opaque and ambiguous? If so, is Kinder setting the market up for a dividend cut? At a minimum it should learn better writing skills. Sax Angle Partners added to their position in Kinder today and now represents a not very aggressive 3% of the Fund. We agree with Jim Cramer here and have always thought Richard Kinder to be a stand up guy and friend of the investor class. Several insiders have recently been buying the stock as well. KMI now yields 10.59%.
