Have you ever heard of the company Kinder Morgan? To many people in Germany, this name may not be familiar. In fact, the Houston (Texas) based company is one of the most important actors in North America when it comes to the storage and distribution of energy resources.

Recently, the management of Kinder Morgan has announced an interesting increase in their forecast, something investors should know about. But let’s first make sure what this is all about: Kinder Morgan has stakes or operates around 132,000 kilometers of pipelines, 140 terminals and 700 billion cubic feet of gas storage capacity. The company transports refined oil products, gas, crude oil, condensate, CO2, renewable fuels and other products through its pipeline network. The terminals, on the other hand, serve as storage and transfer points for kerosene, gasoline, diesel fuel, chemicals, metals and other raw and fuel materials.

Kinder Morgan is therefore a vital lifeline of the US. Interestingly, the company’s infrastructure is also a lever for the energy transition. For example, the big player produces renewable gas and transports biofuels and CO2. The carbon dioxide is previously won by partners by separation and then used in tertiary oil recovery (EQR). The CO2 is pumped into the ground under high pressure to release the remaining resources of older oil deposits. In addition, the CO2 can be permanently and completely stored under the ground as part of the CCS method (Carbon Capture and Storage). Kinder Morgan thus contributes with its pipelines to advance the separation of CO2 and to keep greenhouse gases out of the atmosphere.

The management expects a net income of $1.21 per share in 2024. This would be 11 percent more than the forecast for the full year 2023. At the same time, operating income (adjusted EBITDA) is expected to increase by 5 percent to 8 billion dollars. The management also announced a dividend of $1.15 per share for 2024, the seventh consecutive increase in distributions. The expected dividend yield is a strong 6.4 percent (US closing price on 04.12.2023). The company will not carry out any new share buybacks, as high investments are planned for the ambitious expansion plans.

What speaks for Kinder Morgan in the long term? To make the company more future-proof, Kinder Morgan is increasing its capacity for the production, storage and transport of sustainable fuels and raw materials as well as CO2. The management expects that these services will be increasingly in demand due to government regulations in the coming years, giving the company a boost in profits. Kinder Morgan speculates that customers will be practically forced to pay higher prices in the course of the energy transition, which would support the profit margins.

Kinder Morgan is also getting additional support from geopolitics. Due to the Russian invasion of Ukraine, many European countries – including Germany – have restructured their energy supply and are relying more on liquefied natural gas (LNG). This often comes from the US, which is why transport by pipelines to the liquefaction plants on the coasts must be intensified. And the company is currently benefiting from this.

My conclusion for you: Let’s now take a look at the stock price in the long term (as of US closing price on 04.12.2023):

Source: www.aktienscreener.com

As you can see, the title has not completely returned to its former strength after the massive Corona crash in early 2020. Possible problems are currently the high debt level, the more expensive investments due to the high interest rates and not least the fundamental fear of an end of the fossil age. It is all the more important for Kinder Morgan to develop new business potential in the area of decarbonization.

I think that these opportunities are not yet fully priced into the price. Above all, CO2 separation has a glorious future in the US in my opinion. After all, major players like Exxon Mobil want to invest heavily in this technology, which requires correspondingly capable pipelines.

As an investor, however, you should bring a certain risk affinity and not expect short-term ecstasy, although the dividend yield is attractive.