Is Kinder Morgan Inc (NYSE:KMI) Likely To Crash Again?
Kinder Morgan Inc (NYSE:KMI) crashed terribly during the 2015 downturn in the oil industry, as it went from trading above $42.50 per share to a low of $12.50 per share in early 2016. However, the company went rallied higher to hit new highs around $23 per share in 2017. Despite KMI’s stable operating conditions, investors are not yet convinced that the company shall rally back to its previous highs.
Kinder Morgan is on track to recover from its massive 2015 crash.
The company is keen on increasing its dividend payout over the next three years.
The probability of the company crashing again is minimal.
KMI recently reported its Q3 earnings, which were not impressive, but the company softened the blow to shareholders by announcing a dividend hike to take effect in Q1 2018. However, despite the dividend hike announcement, current investors continued selling their shares, which caused the company’s stock price to decline.
The company’s management reiterated its commitment to raising the annual dividend each year as from 2018 even as the company returns to profitability. It is highly likely that the company’s dividend shall reach its previous $1.5 level by 2021.
Investors should pay attention to the projects that the company is currently developing, which are predicted to cost a total of $12 billion and are likely to be completed by 2020. The most notable factor here relates to how KMI structures its projects as joint venture initiatives with other energy producers.
The completion of the company’s current projects will increase its overall profitability given that they will be immediately utilized as most of the projects already have long-term contracts from KMI’s joint venture partners. This operation model is what guarantees the company’s future profitability as most of its projects are being executed in locations with a ready market for the company’s energy products.
KMI does not operate on the scale that other major oil companies such as Exxon Mobil Corporation (NYSE:XOM) and Chevron Corporation (NYSE:CVX) do, which is why the company’s management had to cut the dividend in December 2015. Companies such as Exxon Mobil and Chevron did not cut their dividend payouts because of their integrated operations, which allow them to operate both upstream and downstream energy operations.
KMI was also servicing a huge debt burden of about $41 billion, which is why it had to cut its dividend, in order to meet its debt obligations. The company’s management is currently focused on repaying its debt, while at the same time reducing its leveraged positions, which bodes well for the company’s future financial performance.
It is highly unlikely that KMI will crash any time soon given the rebound in global oil prices.
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