If 2024 was the year of artificial intelligence and soaring energy demand, pipeline operators also performed strongly. A big gainer, Kinder Morgan (KMI), generated an impressive 55% advance for the year.
Those gains have come with relatively low volatility and a nice dividend yield for shareholders.
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Kinder Morgan, headquartered in Houston, operates nearly 50,000 miles of pipelines and 139 storage terminals across the U.S. While the company’s network transports a variety of products, it is primarily focused on natural gas, with 40% of the U.S. natural gas passing through its system at some point.
As demand for natural gas rises to meet energy needs not covered by renewables, the value of Kinder Morgan’s infrastructure has become even more valuable.
That established network allows Kinder Morgan to pay steady distributions. The stock’s annualized dividend yield is 4.2%, with management expecting a slight dividend increase for 2025 to $1.17 per share annually.
In addition to the dividend growth, management expects earnings growth of 8% next year. This would increase earnings per share to $1.27, up from an estimated $1.17 in 2024.
Dividend Stock Positions For Further Expansion
Kinder Morgan is financially strong, with an investment-grade debt rating of BBB from S&P Global.
The company is further improving its finances with plans to reduce its net debt-to-EBITDA ratio to 3.8 by the end of 2025, within its target range of 3.5-4.5. This positions the company well for potential expansion opportunities in the future, provided the right opportunities arise.
The incoming administration of President-elect Donald Trump is focused on deregulation and ease of approvals, which could spur that expansion.
However, critics will cite valuation concerns after a large run-up in share prices.
Overall, analysts have been positive on Kinder Morgan, with a slew of price-target increases this month. Nevertheless, FactSet’s average analyst price target of 27.29 remains slightly below the stock’s current trading price of around 27.
Shares of Kinder Morgan are forming a flat base as the stock trades above both its 50- and 200-day moving averages. A 28.81 buy point can be identified by MarketSurge pattern recognition.
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