Earlier this year negative media attention and fears of a growth slowdown caused Kinder Morgan Morgan Energy Partners (NYSE:KMP), Kinder Morgan Inc (NYSE:KMI), Kinder Morgan Management (NYSE:KMR) and El Paso Pipeline Partners (NYSE:EPB) to fall to valuations not seen since the financial crisis of 2009.
Kinder Morgan responded by reiterating its distribution growth guidance of 5% for Kinder Morgan Energy Partners, 8% dividend growth guidance for Kinder Morgan Inc, and pointed to its $14.8 billion project backlog as evidence of future growth. That backlog increased to $16.4 billion by the time Kinder Morgan announced record-breaking first quarter results, when it beat its guidance and increased its distribution by 6% and dividend by 8%. This represented 12 out of 13 years in which Kinder Morgan has met or beaten distribution/dividend growth guidance.
Recently three exciting pieces of information have come to my attention. They illustrate why Kinder Morgan's family of companies/MLPs represents some of the best long-term income investments in America.
America's gas future
The Energy Information Administration (EIA) recently published its 2014 energy outlook report, and here are two major highlights:
- By 2040 America's gas production will increase by 56%.
- Before 2020 America will be a net exporter of LNG (liquefied natural gas).
According to a study by IHS, this increased production will require $780 billion in new midstream and downstream (refining and processing) infrastructure by 2025.
This means that Kinder Morgan's current project backlog represents just 2% of this necessary spending, a drop in the bucket that means plenty of potential growth ahead. I've recently learned that Kinder Morgan's potential growth pipeline stands at $15 billion -- representing a near doubling of its current backlog but still representing only 4% of the coming energy infrastructure boom.
Energy megatrends that will drive Kinder Morgan's growth
Kinder Morgan is predicting four key megatrends will drive an increase in natural gas demand of 36% or 23.6 Billion cubic feet/day (Bcf/d) over the next decade:
- Exports to Mexico: +2.5 Bcf/d.
- Natural Gas Liquid exports and petrochemical industry boom: +3.8 Bcf/d.
- Power Generation: +7.2 Bcf/d.
- LNG exports: +10.1 Bcf/d.
Kinder Morgan Energy Partners, Kinder Morgan Management, Kinder Morgan Inc, and El Paso Pipeline Partners represent a $110 billion energy empire that is the fourth largest energy company in America. However, it is merely a large fish in an oncoming tsunami of oil and gas money that is sure to drive strong and consistent dividend/distribution growth for decades to come. This is why Kinder Morgan's family of pipeline companies is likely to remain one of the best income growth choices in America.
Adam Galas has no position in any stocks mentioned. The Motley Fool recommends El Paso Pipeline Partners 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.