Portfolio Update: New Addition (KMI; November 5, 2012)

Like a general manager in sports, sometimes you have to tweak the roster to improve your team’s chances for continued success over the long haul. After closing out two positions today (RIG and SDRL), I used some of the freed up capital to invest in in a prospect who’s future seems overwhelmingly bright.

KMI

Kinder Morgan Inc. (KMI) is a stock that I believe in. I initiated a position last month, and continued to add shares during the secondary offering. KMI took a dip today, and I got in at a lower price than in any of my previous purchases. Today, I added 60 shares of KMI at a price of $33.83/share.

This brings the grand total up to 153 shares. At the current dividend yield of $0.36, I will be receiving $55.08/quarter, or $220.32/year. Since KMI has already gone ex-dividend, I won’t be receiving a payout for these new shares until February of 2013.

Nevertheless, I am pleased to add more shares to my KMI position. Although the current yield is not as high as SeaDrill’s, I like the long-term dividend growth prospects.

Dividend Growth

As mentioned in a previous entry, KMI has increased dividends in 4/5 quarters. Management has even communicated their plans to raise the dividend over 12.5% annually until 2015, and 10% long term:

http://kindermorgan.com/investor/presentations/0412_Salient.pdf

Conclusion

Continuing with the sports analogy, one could say that I traded RIG and SDRL for KMI and a future draft pick (spare capital). For the future draft pick, this time I want to find a candidate who can play strong defense (low risk) and provide solid offense (dividend growth + some price appreciation).

I will take the combination of gold glove caliber defense and high batting average over a home run hitter who strikes out a lot any day of the week. I believe I have a candidate in mind. Let’s just hope Mr. Market will provide the right opportunity!

 

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Compounding IncomeSamirFI FighterDividend MantraRising Returns Recent comment authors
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Dividend Growth Machine
Guest

Nice purchase! That’s a good-sized position in KMI — I’m thinking of adding to my own position.

JC @ PassiveIncomePursuit
Guest

I’ve been watching the price continue to pullback more and have been thinking of adding some more. My only qualms right now is that energy makes up such a large portion of my portfolio right now thanks to my ESPP shares, but I’ll be unloading some every 6 months starting in June of next year unless there’s a big run-up in price.

Rising Returns
Guest

I guess to continue with the sports analogy, I signed two of my players to contract extensions when I increased my positions today.
Thinking about KMI. I think I like it.

Dividend Mantra
Guest

FI Fighter,

Sounds like you’re doing a great job managing the team! I hope you win many championships! 🙂

I really like KMI. As natural gas becomes used in more applications, KMI’s pipelines will be even more valuable. And, if natural gas suffers a price drop again in the future KMI will still charge money to use their services. They get to partake in the upside, and don’t really participate in the downside.

It’s definitely on my list of purchases for November, along with MCD, NSC, VOD and some others. Would love to add to my 100 shares.

Best wishes!

Samir
Guest

Hi FI,

Definitely loving the purchase of KMI. I did exactly as you did and traded away one of my current utilities (NU) for a prospect (KMI) which I believe has a better future. I also love the stated plan to increase the dividend by 12.5% annually until 2015. Sounds like a winner to me!

-Samir

Compounding Income
Guest

High Five! I bought the same stock, on the same day, and at more or less the same price.

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