Investors are either interested in growth, income, or a combination of both. An investment that displays both growth and income is truly a rare breed, and one that investors would be wise to get to know better. Thankfully, there are such investments that can be found under one umbrella—the Kinder Morgan group of securities.
If you're an investor interested in the energy sector, there's likely a Kinder Morgan security for you. Each has its own unique characteristics, and each probably appeals to a different type of investor. Read on to find out why you should give serious consideration to one (or more) of the Kinder Morgan family of stocks.
Four publicly traded entities to consider
The Kinder Morgan umbrella of companies involves four investments: Kinder Morgan Energy Partners (UNKNOWN:KMP.DL), Kinder Morgan (NYSE:KMI), Kinder Morgan Management, (UNKNOWN:KMR.DL), and El Paso Pipeline Partners (UNKNOWN:EPB.DL). In all, the group collectively holds an enterprise value of nearly $110 billion.
Kinder Morgan Energy Partners (KMP) serves as the pipeline and storage facility operator, and is one that retail investors likely know the best because it carries the highest yield of the group. Its very structure as a Master Limited Partnership makes ownership ideal for individuals instead of institutions. That, in addition to its huge 6.5% distribution, make it very popular among retail investors.
An equally impressive MLP
El Paso Pipeline is very similar to Kinder Morgan Energy Partners, as both are Master Limited Partnerships that own and operate oil and gas pipelines and storage facilities. The major difference, of course, is that El Paso is involved primarily in natural gas. Kinder Morgan purchased El Paso Pipeline Partners in 2011 for $21 billion in a move Kinder Morgan CEO Richard Kinder called a 'once in a lifetime opportunity.'
Natural-gas demand is on the upswing, and Kinder Morgan is intent on being there to fulfill the need. Production of natural gas has risen strongly in the United States in recent years, but many promising shale plays lacked the necessary pipeline capacity. That's why Kinder Morgan was quick to step in and snatch up El Paso, and the integration possibilities are indeed attractive. Kinder Morgan will now be able to transport natural gas across the country, no longer being limited to one corner of the country or another.
Kinder Morgan (KMI) owns the general partner and limited partner interests in both Kinder Morgan Energy Partners and El Paso.
Don't want the hassles of a K-1? No problem
Of course, many investors shy away from the potential tax complications of an MLP because of the K-1 statement that they must deal with. Certain items, like unrelated business taxable income (UBTI), make for difficulties come tax time. In light of this, Kinder Morgan decided to create a new vehicle which avoids the hassles of a K-1 statement.
This is how Kinder Morgan Management (KMR) came to be. Institutions quickly took note of the strong performance of Kinder Morgan as a whole, and wanted exposure without the ownership restrictions of Kinder Morgan Energy Partners.
To fulfill that demand, Kinder Morgan created Kinder Morgan Management, which shares the same distribution level as the limited partnership, but owners receive the distribution in shares instead of cash. Therefore, there's no need for a K-1 statement, and there's no risk of UBTI headaches.
Kinder Morgan: A great business, no matter how you slice it
Consider that Kinder Morgan Energy Partners has delivered a 25% average annual returns since 1997. Kinder Morgan Management is no slouch, either: It's returned 15% per year on average since its 2001 initial public offering. And, although Kinder Morgan has only traded since its 2011 IPO, the stock is up a healthy 13% since then -- not including its hefty 4.5% yield.
Kinder Morgan, in all of its various entities, is admittedly complicated on the surface. However, once you dig deeper and get to know the company and its various securities, you'll find a lot to like. All Kinder Morgan publicly traded businesses have strongly rewarded investors since their inception. If you're an energy-sector enthusiast, get to know the Kinder Morgan family of stocks.
Robert Ciura owns shares of Kinder Morgan Energy Partners LP. The Motley Fool recommends El Paso Pipeline Partners LP and Kinder Morgan. The Motley Fool owns shares of Kinder Morgan. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.