Kinder Morgan (KMI 0.91%) One of the top 10 dividend payers Standard & Poor’s 500 index by 6.4%. This is several times higher than the average for this indicator by 1.5%. While the company’s cheap valuation is the main driver of its higher revenue, Kinder Morgan has also increased its payments in each of the past six years.
The big company’s payments should continue to rise in the future. What fuels this belief is its ability to continue securing high-return expansion projects to develop its cash flow. It recently added more fuel to its earnings growth engine and has more potential fuel sources in the pipeline.
Renewal of backlogs
Enter Kinder Morgan Second Quarter With approximately $3.8 billion of project capital in the backlog. She finished that period with about the same amount. However, there was a lot of movement in the backlog during the quarter.
Kinder Morgan put $450 million of capital projects into service during the quarter. One of the notable projects it completed was its first renewable natural gas production facilities since its acquisition of Kinetrex in 2021. This project took a little longer to complete and cost a little more money than expected. However, CEO Steve Kane V.E Conference call in the second quarter We expect the full portfolio of Kinetrex projects to generate a very attractive return on our overall investment, even with the delays we have experienced. Kinder Morgan has also completed its North and South renewable diesel hubs in California and a major renewable feedstock storage and logistics hub in Louisiana. These high-yield projects will provide the company with additional cash flow, giving it more money to support its dividend.
While $450 million in recently completed projects cleared its backlog during the quarter, the company wasted no time in refilling its growth engine. On the call, Kane explained that the company successfully “added approximately $500 million of new projects to its backlog during the quarter.” The largest of these is a $251 million project to expand the Eagle Ford natural gas transportation system, which is supposed to enter service in the fourth quarter of this year. Kinder Morgan also approved a project to expand its natural gas storage capacity along the Texas Gulf Coast, which is supposed to come into service next year. Meanwhile, it spent $15 million to buy a nearby oil field in the Permian Basin. It will start an enhanced oil recovery project at the field next year to start injecting carbon dioxide to increase its production and cash flow. These high-yield projects will help increase its cash flow in the coming quarters, giving it more fuel to pay dividends.
More projects down the pipeline
Kinder Morgan continues to pursue a variety of other expansion opportunities that can fuel future growth. On the second quarter conference call, management indicated that it has resumed talks with potential customers about expanding Gulf Coast Express (GCX). Pipeline. The company began to see renewed interest in the project after that next decade (the next -2.19%) Make a final investment decision to start building in Rio Grande liquefied natural gas project. Rio Grande LNG will drive more natural gas demand in the Corpus Christi region, which could provide enough support for customers to expand the GCX pipeline.
This is one of the many potential opportunities for natural gas pipeline expansion that you see in the future. Co-founder Richard Kinder noted in the call that demand for natural gas in the United States will grow by 20% over the next five years. Most of that growth will come from LNG and Mexico’s exports, benefiting its Gulf Coast assets. Kinder commented on the call, “We believe that growth in demand, combined with the strategic location of our network, will lead to expansion and expansion opportunities for our network and drive significant earnings growth for years to come.”
Meanwhile, the company continues to pursue other low-carbon energy opportunities. Kinder Morgan approved its first carbon capture and storage (CCS) project in January. It is working on several other potential CCS opportunities to build on its existing CO2 infrastructure and expertise. In addition to CCS, Kinder Morgan is pursuing opportunities to capitalize on the growing demand for renewable fuels.
Plenty of fuel to continue growth
Kinder Morgan continues to secure additional high-yield expansion projects to replenish the backlog. These projects will provide additional cash flows to support the increased dividend payments. With more growth in the pipeline, Kinder Morgan remains an excellent choice for those looking for an attractive and progressive passive income stream.