Yesterday I made two purchases; I will report one now and the other this weekend, when I have more time. For my first purchase I bought shares of Kinder Morgan, Inc. (KMI), the fourth-largest energy company in North America and operator of an extensive network of pipelines for transporting natural gas, crude oil, and petroleum products. This was my fifth purchase of KMI in 2013.
The stock price declined sharply this week after management released its financial expectations for 2014 (news release). Management expects high, mid, and low single-digit percent dividend/distribution growth for KMI, KMP, and EPB, respectively, in 2014. There seem to be two reasons for the sell-off among those stocks. First, the dividend/distribution growth projections were apparently lower than expected by some analysts. Second, the relatively flat revenue and distribution projections for EPB were disappointing to some investors. I think the sell-off was an over-reaction and the Kinder Morgan family of companies remains well-positioned for the future. I deemed KMI to be undervalued before the sell-off, so this decline made it even more undervalued (in my opinion).
I bought 50 shares of KMI at the price of $32.835 per share plus commission, giving me a 4.97% yield on cost for this purchase and reducing the cost basis of KMI in my taxable account (which is where I bought these shares) by 4.3%. I combined $1,475 of new capital with existing cash in the account to make the purchase. At the current dividend rate, I can expect to receive quarterly dividends of $20.50 from this purchase, which will add a total of $82.00 to my annual dividend income. I now have a total of 275 shares of KMI (130 in my taxable account and 145 in my Roth IRA) and I will receive combined quarterly dividends of $112.75. My forward 12-month dividend total increases to $3,693. Kinder Morgan is now the largest position in my portfolio (7.0% weight), with NSC dropping to second place. Given its size in my portfolio, I will likely refrain from buying additional shares of KMI for a while.