Strong Results Fuel Dividend Growth at Kinder Morgan Inc

Strong first-quarter results from Kinder Morgan Partners allow Kinder Morgan to raise its first-quarter dividend.

Apr 16, 2014 at 5:14PM

Kinder Morgan (NYSE:KMI) reported strong first-quarter results after the market closed today. The company reported cash available to pay dividends of $573 million, which is up 12% from last year. Kinder Morgan remains on track to meet or exceed its published full-year budget of $1.78 billion in cash available to pay dividends. The company's strong cash flow enabled it to raise its dividend by 11% from the first quarter of 2013 to $0.42 per share this quarter.

Much of Kinder Morgan's strong cash flow this quarter was attributable to its ownership interest in Kinder Morgan Partners (NYSE:KMP). The partnership reported strong first-quarter results enabling it to raise its distribution by 5% to $1.38 per unit. Overall, Kinder Morgan Partners reported distributable cash flow of $693 million, or $1.55 per unit, which is up 26% from the first quarter of 2013.

Cash flow growth at Kinder Morgan Partners was led by contributions from acquisitions as well as strong organic growth. The acquisitions of Copano last May and a drop down transaction with Kinder Morgan in March both performed well this past quarter. These transactions helped to fuel a 46% year-over-year surge in segment earnings in Kinder Morgan Partners' natural gas pipeline segment. The other highlight on the quarter was the terminal segment, which saw first-quarter earnings rise by 22%. Meanwhile, segment earnings in its carbon dioxide business were up 7% over last year while product pipeline segment earnings were up 2% and Kinder Morgan Canada produced segment earnings that were also slightly higher over the first quarter of last year. 

In commenting on the quarter CEO Richard Kinder was quoted in the company's earnings release saying that the company is "excited about the future as we own and operate what we believe is a great set of midstream assets spanning the United States and western Canada. We have identified approximately $16.4 billion in expansion and joint venture investments at the Kinder Morgan companies that we are confident will come to fruition and drive growth at Kinder Morgan for years to come."

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Matt DiLallo has the following options: short January 2016 $32.5 puts on Kinder Morgan and long January 2016 $32.5 calls on Kinder Morgan. The Motley Fool recommends Kinder Morgan. The Motley Fool owns shares of Kinder Morgan. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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