How Kinder Morgan Earnings Will Keep Supporting Its Dividend

Kinder Morgan (KMI 0.27%) will release its quarterly report on Wednesday, and investors have high expectations for growth from the company. With its ownership interest in Kinder Morgan Energy Partners (NYSE: KMP) and Kinder Morgan Management (NYSE: KMR), Kinder Morgan continues to take advantage of the need for energy producers to transport their oil and gas to market.

Most investors in Kinder Morgan concentrate on its natural-gas transportation business, with an immense pipeline network helping move gas across the country. But the company also has other business segments that could play an increasingly important role in maintaining cash flow and producing solid dividends to investors. Let's take an early look at what's been happening with Kinder Morgan over the past quarter and what we're likely to see in its quarterly report.

Stats on Kinder Morgan

Source: Yahoo! Finance.

Which way are Kinder Morgan earnings headed this quarter?
Analysts have gotten increasingly optimistic in recent months about Kinder Morgan's earnings prospects, boosting their June-quarter and full-year 2013 estimates by $0.02 per share and kicking up their 2014 estimates by more than a dime per share. The stock, meanwhile, has inched upward, rising 4% since early April.

We've already gotten good news from Kinder Morgan back in May, when the company boosted its dividend projections by about 2%. Kinder Morgan finalized its acquisition of Copano Energy, giving it access to valuable assets in Texas, Oklahoma, and Wyoming that should help the combined company grow even faster going forward.

But Kinder Morgan also needs to demonstrate its ability to keep its organic growth going. In the first quarter, the company's terminals business only managed to report flat growth, leaving it well off track to meet Kinder Morgan's 12% growth goal for the segment. Also, its carbon dioxide business only saw 1% growth in the quarter, despite producers Occidental Petroleum (OXY -0.09%) and Denbury Resources (DNR) having used CO2 as part of their tertiary recovery methods to get additional oil from largely depleted oil fields in the Permian Basin and on the Gulf Coast.

One interesting area in which Kinder Morgan has expanded its presence is in the coal industry, with a new segment under Kinder Morgan Energy Partners by which the company will acquire, own, and lease coal-producing properties and other natural resources. Kinder Morgan won't mine those products, but in combination with projects to expand its coal-export terminal business, the move makes sense at a time when coal-asset prices are depressed. With major coal producers frantically working to increase their export volumes in an effort to take advantage of international markets and avoid the weak demand for coal domestically, Kinder Morgan hopes to see its export business grow substantially.

In Kinder Morgan's earnings, watch for discussion of whether the recent narrowing of spreads between oil prices from domestic production and world markets will have an impact on its pipeline business. At least for now, though, recovering natural gas prices seem to point toward further growth, and that should keep Kinder Morgan's dividends strong well into the future.

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