Kinder Morgan (NYSE: KMI) currently has a dividend yield approaching 5%. That makes it one of the highest-yielding dividend stocks in the S&P 500, where the average is less than 1.5%.
The pipeline stock’s high-yielding payout makes it an excellent option for those seeking to collect dividend income. Here’s a closer look at its dividend payout.
Kinder Morgan currently pays a quarterly dividend of $0.2875 per share, or $1.15 annually. That payment is about 2% higher than the prior year’s level. The natural gas pipeline company has increased its payout for seven straight years, with the latest raise coming when it reported its first-quarter results in April.
While Kinder Morgan has a high dividend yield, it doesn’t have a high dividend payout ratio. The company is on track to pay $2.6 billion in cash dividends this year. That’s a little more than 50% of its expected $5 billion of distributable cash flow. The company produces very stable cash flow backed by long-term contracts and government-regulated rate structures.
That conservative payout ratio enables Kinder Morgan to retain cash to fund expansion projects and maintain a strong balance sheet. The company currently has $5.2 billion of committed capital projects, around half of which should enter service by the end of next year. It also has a large $1.7 billion pipeline expansion project that should begin commercial service in late 2028. These projects will grow its cash flow, giving it more fuel to pay dividends.
Kinder Morgan also has a strong balance sheet. It expects its leverage ratio to be around 3.9 times by the end of this year. That’s comfortably within its recently lowered long-term target range of 3.5 to 4.5. That gives it the flexibility to approve additional expansion projects, make accretive acquisitions, and opportunistically repurchase shares.
Kinder Morgan’s stable cash flow and conservative financial profile put its high-yielding dividend on a rock-solid foundation. With more growth ahead, it’s an excellent option for those seeking a sustainable and steadily rising stream of dividend income.
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Matt DiLallo has positions in Kinder Morgan. The Motley Fool has positions in and recommends Kinder Morgan. The Motley Fool has a disclosure policy.
What Is the Dividend Payout for Kinder Morgan? was originally published by The Motley Fool
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