Kinder Morgan (KMI) Update - Dec 15

[dan_s]

Note below is from the Bank of America Equity Research Team on 12/15/2020

Last Tuesday, KMI announced its preliminary 2021 financial expectations including its shareholder return policy. The preliminary guidance for 2021 adjusted EBITDA/DCF of $6.8/4.4bn are below current forecasts for 2020, and also lower than BofA/consensus 2021 estimates. KMI indicated that weaker expectations YoY reflect lower re-contracting rates on certain natural gas pipelines (mainly Ruby and FEP pipelines) as well as lower crude volumes/prices in their CO2 segment among others. Most notably, recent investor focus had been on KMI's 2021 shareholder return policy.
KMI now intends to raise its dividend by 3% to $1.08/share in 2021 (from $1.05 in 2020), compared to the $1.25/share that was contemplated pre -pandemic. The dividend will also be supplemented by opportunistic share repurchases of up to $450mn. KMI anticipates that repurchases at that level would result in net leverage of ~4.6x vs LT target of ~4.5 .

KMI is a C-Corp. that is currently trading at $14.52, which compares to my valuation of $15.00. Annual dividend yield is ~7.4%.