There's a lot of uncertainty these days. Tariffs could cause a severe economic downturn, depending on who you listen to. That would have a significant impact on corporate profits. This potential impact is why stock prices have been so volatile this year.
However, while the market is in turmoil, Kinder Morgan (KMI 1.47%) continues sailing along rather smoothly. That's a tribute to the natural gas pipeline giant's very stable business model. Its resiliency during turbulent times and high-yielding dividend make it a safe haven during market storms.
NYSE: KMI
Key Data Points
Rock steady amid the market turmoil
"Obviously, we are going through turbulent times, with some voicing fears of an economic downturn," stated Richard Kinder, Kinder Morgan's co-founder and executive chairman, in the company's recent first-quarter earnings report. However, he continued:
History shows that our company is largely insulated against temporary volatility, due to our time-tested business model structured around long-term take-or-pay, fee-based contracts with credit-worthy customers. As has been the case in past periods of economic instability, our company can be a safe haven during the storm.
The company demonstrated its safe-haven characteristics during the first quarter, as its results were about as stable as they get. The pipeline company reported nearly $2.2 billion of adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA), up about 1% from the first quarter of last year.
CEO Kim Dang commented, "The company enjoyed a solid quarter, with very strong operational performance and increased financial contributions from our natural gas pipelines, carbon dioxide, and terminals business segments versus the first quarter of 2024." She noted that the only segment that produced lower results was its products pipelines business segment. However, that was entirely due to maintenance at a facility that it must complete once every 10 years.
Kinder Morgan produced nearly $1.2 billion in cash flow from operations during the quarter. That was more than enough money to cover its dividend payment ($642 million). The company used its post-dividend excess free cash flow and strong balance sheet to help fund expansion projects ($766 million of capital spending in the period). The midstream giant also closed its $640 million acquisition of a natural gas gathering and processing system in the Bakken Formation of North Dakota.
The company's strong cash flow, low payout ratio, and visible growth profile gave it the confidence to increase its dividend by about 2% for the first quarter. That's the eighth straight year that Kinder Morgan has increased its dividend.
Visible growth coming down the pipeline
While there's a lot of turbulence in the market right now, Kinder Morgan's future looks bright. Demand for natural gas is growing stronger. The U.S. set a record for production volumes and demand in the first quarter. Meanwhile, the company expects that demand will continue surging in the coming years, fueled by liquefied natural gas (LNG) exports and growing power demand to support the onshoring of manufacturing, artificial intelligence (AI) data centers, and other drivers.
The company's growing backlog of expansion projects reflects this strong growth outlook. Kinder Morgan ended the first quarter with $8.8 billion of projects in its backlog. That's a nearly 8% increase from the end of last year. Meanwhile, that's several billion dollars higher than it had been in previous years.
The company added about $900 million of new projects to its backlog in the quarter, led by the $431 million 71-mile Bridge pipeline project. It will provide 325 million cubic feet of natural gas transportation capacity to help meet growing demand in the state of South Carolina when it comes online in the second quarter of 2030. That project further enhances and extends the company's growth outlook, giving it visibility into the next decade.
The company's commercially secured expansion projects will provide it with incremental sources of stable cash flow as they enter service over the next five years. That will give the company more fuel to increase its high-yielding dividend.
A safe stock to hold in uncertain times
Kinder Morgan can be a stabilizing force for any portfolio. The natural gas pipeline giant generates very stable cash flow, backed by long-term, fee-based contracts. Meanwhile, with a growing backlog of commercially secured expansion projects, the company should grow steadily even if we enter a period of economic turbulence. Those features make it a great safe-haven investment to take refuge in during uncertain times.
