Trust is a major issue on Wall Street that investors shouldn't take lightly, given that buying a stock is basically trusting a management team to make good use of your capital. Some companies earn that trust over time, while others seemingly burn through whatever trust they've been given. Kinder Morgan (KMI -0.60%) continues to sit in the latter camp, as it still hasn't hit this key 2020 dividend goal.

A brief history

On Oct. 21, 2015, Kinder Morgan increased its quarterly dividend to $0.51 per share. In the news release announcing the increase, management stated: "Additionally, while we are at the beginning of our budget process for 2016, we currently expect to increase our declared dividend for 2016 by 6% to 10% over the 2015 declared dividend of $2.00 per share. We expect this range will provide the flexibility for us to meet our dividend and have excess cash coverage."

Scissors cutting a one hundred dollar bill in half.

Image source: Getty Images.

That's a promising statement that dividend investors probably found reassuring, only that by Dec. 4 of that year, the company came out with an update, explaining: "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." It added that the board would be reviewing the dividend policy.

Just four days later, on Dec. 8, the company announced that the quarterly dividend would be cut to $0.125 per share. In less than two months, shareholders went from being promised a dividend increase of up to 10% to getting hit with a dividend cut of 75%. To be fair, the energy sector was in a downturn at the time, and alternative options for raising capital were not attractive. The board probably made the right move for the company, but it was one that obliterated investor confidence.

That was then; this still isn't 2020

The North American pipeline giant quickly got to work to rebuild trust, much to its credit. In mid-2017, it announced a plan to start returning cash to investors again. The first increase, in 2018 was a doozy, at 60%. That was to be followed by 25% increases in 2019 and 2020, bringing the quarterly dividend up to $0.3125 per share. Although the 2020 target was still below the pre-cut level, it was clear that management wanted to reward investors for suffering through the cut.

And then the global pandemic in 2020 put the energy industry into another tailspin. Kinder Morgan chose to increase the dividend 5% instead of 25%. Once again, this was the right move for the company, given the uncertainty at the time, but it also managed to fall short of its dividend promises again. 

Now that the energy market has recovered, investors might expect that the dividend has been increased to that 2020 goal and, perhaps, even above it. But that's not what's happened despite even though Kinder Morgan's distributable cash flow covered its 2022 dividend by nearly two times. Indeed, the quarterly dividend ended 2022 at $0.2775 per share. 

Prudence versus trust

If Kinder Morgan had paid the $0.3125 per share it promised in 2020, the 2022 coverage ratio would have been a very respectable 1.75. The company is probably being cautious because growth opportunities in the midstream sector aren't particularly huge today, which makes sense. But for conservative investors looking to live off the dividend income their portfolios generate, Kinder Morgan's ongoing inability to live up to its promises should probably be a worry that keeps them on the sidelines. There are better options in the midstream sector.