Should You Buy Kinder Morgan While It's Below $25?

Kinder Morgan, one of the largest energy infrastructure companies in North America, has seen its stock price fluctuate in recent years. As of late 2024, the stock is trading below $25, leading investors to wonder if this is an opportune time to buy. This article explores the key factors driving Kinder Morgan's stock price, its dividend yield, and the potential risks and opportunities in the energy transition.


Key Factors Driving Kinder Morgan's Stock Price
Kinder Morgan's stock price is influenced by various factors, including the energy transition, regulatory changes, and the company's operational performance. The energy transition is a significant factor, as Kinder Morgan is grappling with how to serve the urgent energy needs of the moment while laying the groundwork for a future model that uses less fossil fuel. Additionally, regulatory changes, such as the excise tax, can affect the company's ability to repurchase shares and maintain its dividend yield.


Dividend Yield and Payout Ratio
Kinder Morgan's dividend yield is attractive, currently around 6%. This is higher than the average yield of other energy infrastructure companies. The company's payout ratio is also manageable, indicating that the dividend is sustainable. However, investors should keep an eye on the company's earnings growth and cash flow generation to ensure the dividend remains stable.

Potential Risks and Opportunities in the Energy Transition
The energy transition presents both risks and opportunities for Kinder Morgan. The company's exposure to different energy commodities, such as natural gas and crude oil, may impact its revenue and earnings growth. As the world moves towards a lower-carbon economy, there is a risk that demand for fossil fuels may decrease, affecting Kinder Morgan's business. However, the company also has opportunities to invest in renewable energy infrastructure, such as renewable natural gas generation, which can help mitigate these risks.


Kinder Morgan's Management and Shareholder Value Creation
Kinder Morgan's management and board of directors have a track record of creating shareholder value. The company has a $3 billion stock buyback program, which can help boost the stock price by reducing the number of outstanding shares. Additionally, Kinder Morgan has the potential to create value through acquisitions, divestments, or operational improvements. The company's focus on infrastructure development and expansion can also drive long-term revenue growth and earnings potential.

In conclusion, investors should consider buying Kinder Morgan while it's below $25, given its attractive dividend yield, manageable payout ratio, and potential for shareholder value creation. However, investors should also be aware of the risks and opportunities presented by the energy transition and monitor the company's earnings growth and cash flow generation. By doing so, investors can make an informed decision about whether to buy Kinder Morgan at its current price.