Dividend Stocks to Buy Now: Kinder Morgan Inc. (KMI)
KMI Dividend Yield: 4.7%
I’ll start with one of my very favorite energy infrastructure companies, Kinder Morgan Inc. (KMI), which is down about 13% from its May highs.
If you are an income investor, you are no doubt familiar with Kinder Morgan Energy Partners (KMP). It’s one of the most popular and widely-held pipeline MLPs, and with good reason. Since going public in 1992, KMP stock has delivered returns of more than 1,200% … and that does not include distributions.
Kinder Morgan Inc. is the general partner of KMP and can be thought of as a leveraged play on the MLP due to what is called “incentive distribution rights.” KMI gets half of any distribution increase by Kinder Morgan Energy Partners. (Kinder Morgan Inc. is also the general partner of El Paso Pipeline Partners [EPB)].
KMI stock has had a poor 2013 for a couple reasons. In addition to the same Fed tapering fears that have sapped virtually all dividend stocks, KMI took a beating after El Paso Pipeline Partners posted unimpressive earnings and gave guidance on the distribution that was shy of what Wall Street expected. A high-profile short campaign by research firm Hedgeye didn’t particularly help KMI stock either.
Yet if Kinder Morgan’s prospects were so dire, then why are its insiders buying the stock hand over fist? In the month of December alone, founder and CEO Richard Kinder purchased 828,000 shares of KMI stock on the open market worth over $27 million. This followed the 500,000 shares he purchased in June and again in September. Since June, Richard Kinder has amassed a staggering 1.8 million shares of KMI worth over $60 million.
And he’s not the only insider buying. Director Sarofim Fayez chipped in $15 million of his own money, and Vice President James Street added $130,000. I recommend we invest with the insiders. At time of writing, KMI stock yields an attractive 4.7%, and management expects to raise the dividend by about 8% in 2014.