Share of midstream oil and natural gas giant Kinder Morgan Inc. (NYSE:KMI) fell around 5% last month. The decline was more than similarly large and diversified peer Enterprise Products Partners (NYSE:EPD) and smaller but well-respected Magellan Midstream Partners (NYSE:MMP). More interesting, however, is that it follows a month in which Kinder easily outdistanced peers -- in July, Kinder was up over 6% while Enterprise and Magellan were flat to lower.
Generally speaking, Kinder's stock price followed the general trend of both Enterprise and Magellan in August. So, in some respect, there was nothing odd about Kinder's price movements. It just represented broader investor sentiment about the midstream space.
However, it did drop more than some of the most prominent names in the industry. But that's likely a reflection of the quick advance following the company's dividend announcement in July. On July 19, Kinder explained that it was planning to increase its dividend 60% in 2018, 25% in 2019, and another 25% in 2020. Investors were pleased with that news, as it puts the midstream giant back on the path of dividend growth. The company cut its dividend in 2016 as a way to help fund its growth spending.
So, when you expand the lens just a little, the underperformance in August was likely Kinder giving back a little of the news-driven gain from July. It's not unusual for investor enthusiasm to wear off like this.
At this point, investors should be focusing on the fundamentals of Kinder's business, not the month-to-month moves of its stock. Based on the July dividend news, things appear to be looking up. However, you need to put some perspective on that, even after all three increases Kinder's dividend won't be back to where it was prior to the 2016 cut. And with a modest yield of around 2.6% today, income investors are probably better off looking at higher-yielding midstream names like Enterprise and Magellan.
Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Kinder Morgan. The Motley Fool recommends Enterprise Products Partners and Magellan Midstream Partners. The Motley Fool has a disclosure policy.