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The Largest US Pipeline Operator Is Plunging After It Just Cut Its Dividend By 74%
Everything is not awesome. We have three small words for all those MLP-holders: "Paid to wait."
From a dividend of 51 cents, expectations were for a cut to around 32c.. but the company slashed the dividend to just 12.5c - strongly suggesting the balance sheet is considerably worse than expected... a 74% collapse!
And some context for the drop... From a high of $44.71 in April, After hours of $14.62 show a 67% collapse in 7 months
Kinder Morgan Statement:
Kinder Morgan, Inc. (KMI) today announced that its Board of Directors has approved a plan pursuant to which it expects to pay quarterly dividends of $.125 per share to its common stockholders ($.50 annually), down from its current quarterly level of $.51, beginning with the fourth quarter 2015 dividend payable in February 2016. This dividend enables the company to use a significant portion of its large cash flow to fund the equity portion of its expansion capital requirements, eliminate any need to access the equity market for the foreseeable future and maintain a solid investment grade credit rating. KMI anticipates enough retained internally generated cash flow to fund all of the required equity contribution projected for 2016 and a significant portion of its debt requirements. The company has reviewed its expected investments in 2017 and 2018 and believes that its stable and growing internally generated cash flow will allow it to continue to fund the equity portion of its capital budget without the need to access the equity market. It anticipates meeting all of the rating agencies’ requirements to remain investment grade, and expects a net debt/EBITDA ratio of 5.5 for 2016 and anticipates reducing that ratio in subsequent years.
“We evaluated numerous options, including significant asset sales, but ultimately concluded that these other options were uneconomic to our investors in the long run. This decision was not made lightly, but we believe it is in the best interests of the company, its shareholders and employees,” said Rich Kinder, executive chairman of the KMI board. “It will allow us to continue to maintain and grow our outstanding set of midstream energy assets without being required to issue equity at valuations prevalent in today’s market while maintaining a solid investment grade rating on our debt obligations. We are directly addressing concerns about our investment grade rating and concerns about the need to issue additional equity. We believe today’s action is beneficial to our shareholders.”
“Our strategy always has been, and will continue to be, to focus on fee-based midstream energy assets that are core to North American energy markets,” said Steve Kean, president and CEO. “Our execution of that strategy has enabled us to grow distributable cash flow (DCF) per share and we believe we will continue to do so.”
The company has completed its budget process for 2016 and expects DCF available to its equity holders of slightly over $5 billion, an increase of approximately 8 percent over 2015. “We grew our DCF per share in 2015 and we expect to grow again in 2016, despite a very difficult environment in the energy sector. We believe we have the best set of assets in the midstream energy business and the cash generated by those assets is fee based and growing. Today’s action is not a reflection of our underlying business – our business is strong and growing. Today’s decision is about finding the most economic way to fund our set of attractive return expansion projects,” said Kean.
It’s the first time since 2011 that the pipeline giant co-founded by Texas billionaire Rich Kinder in 1997 has reduced its dividend. The stock has plunged by half since Oct. 21, when the company began scaling back promises to raise dividends in 2016. On Dec. 4, Kinder Morgan said $5 billion in expected 2016 distributable cash flow may be diverted to operations from dividends.
Energy and commodity companies from oil drillers to rig owners to coal miners have sacrificed dividends to conserve cash amid supply gluts and collapsing markets.
When there's no traffic, toll roads don't work.
Charts: Bloomberg
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Wait... Where are the fucking buy backs?
Surely the dividend was cut to fund share buy backs... there can't be any other reason!
This dividend enables the company to use a significant portion of its large cash flow to fund the equity portion of its expansion capital requirements
lol. Love the adjectives, and yet price still plummets. Remove those words and we get closer to the truth:
This dividend enables the company to use its cash flow to fund the equity portion of its capital requirements.
In other words, "We owe and are out of cash".
I'm sick of the constant bullshitting in finance. Yet when anyone points it out, they're "too negative" or "unsupportive". If you have no money, you're fucked. Admit it.
Dumbasses. Just rename it the iPipe and watch the stock skyrocket 1300% on no revenues. Sheesh, you'd think they would learn by now.
Moody's just raised their outlook to stable after moving it to negative on Dec 1.
You just know that any time you get an announcement with words like "pursuant to" that it isn't going to be in your favor.
The divy world is about to change, forever. Individual investors will soon own paper shares with no connection or correlation to the company name printed on it. IPO money is long gone and now shareholders will be like bothersome social security recipients, in the way of progress.
yes, where are those damn fucking buybacks? Got to keep those stock prices up!
a Cramer "fave" up until a few months ago.
maybe this will prompt someone to finally take him out UFC style
...while maintaining a solid investment grade rating on our debt obligations.
solid ig rating according to whom? moodys? bwa ha ha!! they have no cash, a mountain of debt, and are considered ig? we're friggin' doomed. i fart in the general direction of kmi infestors who thought that 12%+ divi was safe. suck it blackrock. it's just not your day.
From pipelines to pipejobs...
a Big FD to buy
I was wondering what the hell was up with KMI today. PAA and EPD up. Maybe the div. collectors jumped ship to get divs. from other MLP's. This was an area I was watching for a bottoming so I could feed on divs. too. I sometimes look at TRGP that has really dived only to spring up 7%+ today. Could these companies be next in line to end div. payments?? I used to watch the shippers too for dividends but OMG I don't watch them much any more. I really don't want to be a day trader or short term trader.
any thoughts on an ETF for a longer term play, (no sarc)
These pipeline MLP's are all ponzis. They borrow money or issue more shares to fund the dividends.
I remember just a few years ago how Morgan Stanley was whooping up how these MLP's were the place to be....
F me
"We'll pay 5 cents to shipt thru your pipes.
"Sorry, not enough. We are cleaning our pipes and renting them out to Syrians. For housing."
Shucks. Too bad I sold those awhile back. Could have been on the drama train.
+1000 for the Kinder Surprise Egg image in the KMI, 1 Min chart.
Instant classic.
Looks like a buying opportunity. Somehow , I don't think KMI is going bankrupt. Are we going to stop transporting oil and drilling? This is the perfect time to buy when all the idiots think oil is going to $10. It's temporary and when the USD comes back down to reality, then KMI will be a $40 stock again.
this is a BTFD opportunity at the open.. any shares below $15 3.3% yield are a steal..
Exactly the reason why I bought treasuries instead of MLPs.
I have been getting secure safe income plus HUGE capital gains.
MLP buyers reached for yield and got screwed.