In today's era of over-inflated CEO compensation, a $1 CEO can garner plenty of attention. Larry Page, John Mackey, and the late Steve Jobs have all received press for running great companies for a buck a year. One of the lesser known $1 CEOs, Richard Kinder, has quietly led his eponymous trio of companies on that same annual salary. He prefers to be compensated the same way his shareholders are, by dividends and units in Kinder Morgan's limited partnerships.
Multiple companies, multiple returns
When Richard Kinder and Bill Morgan founded Kinder Morgan (NYSE: KMI) in 1997, its biggest asset was a $40 million pipeline purchase from Enron and the enterprise value of the company was about $300 million. Once the recent El Paso Corp. acquisition is completed, the enterprise value will be roughly $94 billion. Not bad. The company has grown to include Kinder Morgan Management (NYSE: KMR) and Kinder Morgan Energy Partners (NYSE: KMP) as well.
While some $1 CEOs may be more gimmick than substance, Kinder is the real deal. He parks in the same garage as his employees; Kinder Morgan execs fly coach for business. Keep in mind this is the 46th richest person in America we're talking about. Most remarkably, he hasn't attempted to sell his antique map collection to his own company. This is a CEO who refuses to waste shareholders' money.
Speaking of shareholders' money, the dividend and yield for KMP is sitting at $4.64 and 6.2% respectively. KMI's numbers are also impressive, with a dividend of $1.20 and a yield of 4.3%. Who doesn't appreciate more than one way to cash in on Richard Kinder's success?
Two MLPs walk into a bar
Fellow Fool Chuck Saletta does a great job breaking down the basics of the Kinder Morgan companies, explaining how and why there are three Kinder Morgan stocks to choose from:
|
Specific Entity |
Shares Represent... |
|---|---|
| Kinder Morgan Energy Partners | Direct ownership of limited partnership interests |
| Kinder Morgan | Indirect ownership of general partnership interests |
| Kinder Morgan Management | Indirect ownership of limited partnership interests; alternative to Kinder Morgan Energy Partners shares |
Essentially, each vehicle gives investors exposure to different levels of Kinder Morgan, complete with different tax rules and voting privileges. Check out Chuck's write-up for a more detailed breakdown.
When Chuck wrote about Kinder Morgan in March, the company was suffering from poor performance from its Rockies Express pipeline. Things have slowly started to turn around, though, as earnings from the pipeline ticked up 3% in the third quarter over the same period last year.
The share price movement for all three companies over the last six months:
Kinder Morgan Stock Chart by YCharts
After our tumultuous summer, the Kinder Morgan companies have rebounded nicely. Though flow through Kinder Morgan pipelines was down 0.4% in the third quarter, numbers still came in higher than the national average -- a good sign for all entities.
More numbers
The Kinder Morgan companies have been busy, most recently agreeing to buy El Paso Corp. for $38 billion (including debt). Once that deal closes, Kinder Morgan will own 80,000 miles of pipeline and will be the fourth largest energy company in the U.S.
In the third quarter, KMP reported that net profit dropped 32% over last year, but cash distributions to unit holders rose 5%. The lower net income came at the hands of a $167.2 million writedown of a natural gas gathering system and a$69 million adjustment on right-of-way lease payments. Still, KMP expects to outperform its previously estimated $4.60 cash payout per unit by year's end.
Net income jumped for KMI, from $10 million on $2 billion in revenue last year to $151 million on $2.6 billion in revenue this year, resulting in a dividend of $0.30 per share.
Another deal expected to pay dividends is KMP's joint venture with Valero (NYSE: VLO). The companies are building a 136-mile pipeline connecting refineries in Louisiana to a petroleum hub in Mississippi, bringing gasoline, jet fuel, and diesel to the major markets in the Southeast. The pipeline's initial capacity will be about 110,000 barrels per day, eventually increasing to over 200,000 bpd.
Foolish takeaway
Richard Kinder is committed to growth and shareholder return. Often viewed as the "Godfather" of the natural gas pipeline business, the man gets it. I'm confident enough in his leadership and decision-making ability to head over to Motley Fool CAPS and give a thumbs-up to all three Kinder Morgan entities.
There is much to like about Kinder Morgan's emphasis on shareholder return. The companies are not alone on this one, though -- click here to check out 11 more companies with great dividends, handpicked by Motley Fool analysts.
