Kinder Morgan's $640 Million Acquisition: Fueling Dividend Growth

Kinder Morgan (KMI) investors have been treated to a steady stream of dividend increases over the years, and the company's latest acquisition is set to keep that trend going. In a strategic move, KMI has agreed to purchase a natural gas gathering and processing system in North Dakota for $640 million. This acquisition aligns perfectly with the company's long-term growth strategy and is expected to be immediately accretive to earnings.



The acquisition includes a 270 million cubic feet per day processing plant and a 104-mile, large-diameter, high-pressure rich gas gathering header pipeline with 350 MMcf/d of capacity. This system is backed by long-term contracts with commitments from major customers in the basin, providing a solid foundation for growth. By integrating this complementary system with its existing Hiland assets, KMI expects to reduce future capital expenditures needed to accommodate the growth of its existing Bakken customers. This integration will enable the company to optimize its operations, improve efficiency, and potentially reduce costs.



KMI expects the acquisition to be immediately accretive to its shareholders, with a 2025 Adjusted EBITDA multiple of approximately 8 times on a full-year basis. This acquisition is expected to reduce future capital expenditures, freeing up funds for other expansion projects and further enhancing KMI's growth prospects. The company anticipates generating $1.27 of Adjusted EPS in 2025, up 8% from its 2024 forecast, and $8.3 billion of Adjusted EBITDA, up 4% from the 2024 forecast. This growth is driven by expansion projects across all business segments, with the Natural Gas Pipelines and Energy Transition Ventures segments leading the way.



KMI's acquisition strategy has been a key driver of its dividend growth in recent years. The company has completed billions of dollars in projects and has more in the works, helping to fuel its 4%-yielding dividend. This latest acquisition is expected to continue that trend, providing additional cash flow to support the company's high-yielding dividend.

In conclusion, Kinder Morgan's $640 million acquisition of a natural gas gathering and processing system in North Dakota is a strategic move that aligns with the company's long-term growth strategy. This acquisition is expected to be immediately accretive to earnings, reduce future capital expenditures, and provide additional cash flow to support the company's 4%-yielding dividend. As KMI continues to execute on its growth strategy, investors can expect to see further dividend increases in the future.