Back at it again! Finally, after I just stated I haven’t made a purchase in weeks and nothing looked appetizing, I made a purchase on October 22nd – when the market was…. ALL GREEN almost. Well, in every green day there has to be one stock that looks undervalued. I ended up buying a stock I already own after another dividend increase. Let’s see who I purchased.
Kinder Morgan Inc. (KMI)
Yes, you read the title right. Kinder Morgan has been added back to my portfolio, and it wasn’t the solo stock that was on my watch list that was released on Friday. In fact, I already owned approximately ~66 shares that produced, at one point, $129.36 shares on $0.49 per quarter. However, they released their earnings, which went along as expected with further pressure and slight tightness in their cash flow. However, I believe they just displayed a sign of confidence in their cash flow in the future. First, their target at the end of the year was to have an annual dividend of $2.00 per share or $0.50 per quarter. They smirked and increased their dividend to $0.51 from $0.49 or an annual $2.04 per year dividend, and went beyond their goal of $2.00 or 2% higher. Further, they came into the year at $0.44 per quarter. The increases now throughout the year have led to $0.51 or an astounding 15.91% dividend growth this year!
I say that’s pretty phenomenal. I do not believe this growth rate will continue but they hit on 2 items: One, we are going to hit our dividend goals and two, we are going to show our confidence in our ability to produce cash flow by going beyond our goal right now and instill faith in the investor. They further stated this in their press release:
“Additionally, while we are at the beginning of our budget process for 2016, we currently expect to increase our declared dividend for 2016 by 6 to 10 percent over the 2015 declared dividend of $2.00 per share. We expect this range will provide the flexibility for us to meet our dividend and have excess cash coverage.”
They accomplished that for me, at least. I would expect a 5-7% growth rate going forward into 2016, but with the yield where it’s at… well I’m not complaining let’s say. I know this isn’t on Bert’s 5 always buy stock list and is finally a stock purchase that is something other than Emerson Electric (EMR), which I’ve purchases three times already this year. To show some figures with what this purchase is, let’s dive into the summary.
KMI Stock Purchase Summary
I purchased midday on October 22, 2015 34.00 shares at $29.29 per share + commissions of $6.95. Total cost = $1,002.81. Dividend Income added at $2.04 per share per year, 34 X $2.04 = $69.36 added. Total shares of Kinder Morgan (KMI) owned now stands at ~100 shares in my portfolio, which now produces a forward annual amount of over $204 of dividend income per year. At the price of approximately $30 per share, that is close to 7 new shares added per year, which would add $14 going forward upon reinvestment at the analyzed price of $30. Loving this! Also, if 2016 brings 5% growth to the dividend, $204 would turn into $214 and so forth… without including new dividend reinvested shares throughout the period. Also, forgot to mention, at $2.04 in dividends per year at a purchase price of $29.29, this yield was at 6.96% going forward. Therefore, the yield was higher than my weighted average yield, as well as the dividend growth of 15.91% was higher than my weighted average dividend growth. One last piece of icing – my first purchase price was approximately $32.45. Therefore, the stock dropped roughly 9.7% from the first time I purchased KMI last year. Love to average down my cost this way, add more yield for less money (one of the reasons why a downturn is good for a dividend investor). Further, a close to $70 add allowed me to cross the $6,400 mark which aims me closer to my $6,750 projected dividend income goal by the end of the year, still have a mountain to climb, but this pipeline is helping me get there.
All in all, I was happy with this purchase and it had been essentially three weeks since I made a move into the market, as stocking capital during appreciating days in the market isn’t a bad thing. Just need to find signs of opportunity (which one could argue I should have purchased when it was down in the $25-26 range a few weeks ago) and strike when you can/are able to. What does everyone think of this dividend stock purchase of KMI? Think this was a good purchase? Would you buy? What else are you seeing? Thank you for coming by and as always – appreciate your input and comments. Talk soon!
-Lanny