On Wednesday of this week I made another purchase. It was actually the first purchase I'd made in almost a month which is a bit longer than I prefer my purchases to be. Shares of Kinder Morgan, Inc. (KMI) have been under fire over the last month or so after a scathing article by Barron's questioning Kinder Morgan's calculation of distributable cash flow, the life blood of the dividend. Essentially, the question is how much of Kinder Morgan's capital expenditures are for maintenance versus expansion.
The attacks by the Hedgeye energy analyst seem to be largely unfounded and given the criticism and struggling share price, CEO Richard Kinder responded to the claims and even purchased 200k more share of KMI. You can read Kinder Morgan's full response to the claims here. I love finding companies where the CEO is heavily invested in the company's performance. Notably, CEO Richard Kinder's salary is a minuscule $1 per year which is much less than the average CEO compensation package. Seeing as how he owns over 240 million shares of KMI and has the majority of his net worth invested in the partnership, I imagine he'll do everything in his power to run the companies as responsibly as possible to insure that the distributions/dividends continue to increase each and every year.
On Wednesday I purchase 45 more shares of the general partner Kinder Morgan, Inc. (KMI) for $31.05 per share. My cost basis for this lot comes to $31.23 after commission. Based on the current quarterly dividend of $0.41 per share this lot carries a YOC of 5.25% and will provide $73.80 in forward dividends. A quick valuation of the company using the Gordon Growth Model gives a fair value price of $41.00 assuming a 6% dividend growth rate and a 10% discount rate, so there's a pretty large margin of safety at current prices.
This purchase brings my position to a total of 218 shares and it currently makes up about 5.5% of my portfolio. With a per share cost basis of $31.23, this new lot was purchased at a 9.0% discount to my previous cost basis which let me average down my cost basis. My cost basis decreased from $34.31 to $33.68 or 1.85%.
My 12-month forward dividends finally crossed over the $4,000 mark and are at $4,046.69. I've still got a long way to go to reach my goal of $5,000 by the end of the year but it's definitely still in play.
I've updated my Portfolio page to reflect this addition.
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