MARCH MADNESS: Apple (AAPL) vs. Kinder Morgan (KMI)

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You, dear reader, have spoken. Apple Inc (NASDAQ:AAPL) and Kinder Morgan Inc (NYSE:KMI) are moving on to live another day in our Stock Market Madness 2015 bracket.

march-madness-250AAPL stock crushed Google Inc. (NASDAQ:GOOG, NASDAQ:GOOGL) in a quarterfinal head-to-head matchup pitting the two biggest players in Silicon Valley against one another. The final tally: 474 votes for AAPL, 144 votes for GOOG.

Ouch.

As for Kinder Morgan, the $87 billion pipeline company faced a far greater challenge in entertainment giant Walt Disney Co (NYSE:DIS), winning in a hard-fought 364-296 contest that came down to the final hours. I doubt the KMI-AAPL showdown will be much more forgiving.

First, let’s take a look at AAPL.

Apple (AAPL)

Apple, at $735 billion, is the largest company on the planet; if we assigned seeds in our bracket it would naturally command the #1 overall spot. It’s getting to be that way on Wall Street too, with research firm Cantor Fitzgerald recently giving AAPL stock a $180 price target, implying upside of more than 40% and a market value in excess of $1 trillion.

It’s not impossible.

AAPL stock is up about 60% in the last year as monster iPhone 6 sales and eight consecutive quarters of earnings beats were too much for investors to ignore. Moving forward, Apple’s prospects are hard to describe as anything other than glowing. It’s got $178 billion in cash and investments, China sales are looking like a legitimate growth engine, AAPL is plotting an overhaul of Apple TV and its own streaming bundle, Apple Watch goes on sale next month, and the company is rumored to be working on an electric car.

Oh, and Apple Pay is also taking the mobile payments market by storm. It also pays a 1.5% dividend which could continue to rise, especially considering Apple’s cash hoard.

No. 1 seeds are No. 1 seeds for a reason.

Kinder Morgan (KMI)

Kinder Morgan? How can the likes of Kinder Morgan go up against Apple?

Easy. KMI stock has its own laundry list of bullish catalysts.

First off, while Kinder Morgan is an energy pipeline company at heart, that doesn’t mean its overly reliant on commodities prices to prop up its stock price. Far from it. With oil prices about 50% off 52-week highs, KMI stock still has managed to rally 32% over the last year. With dividends, shares are up 36%.

How is that exactly? InvestorPlace Contributor Jason Jenkins explains:

“The key to KMI’s bottom line is that it’s a fee-based business — users pay a fee to use its pipeline highway. Fees accounted for more than 80% of cash flows last year. And it’s this model that protects the company against any commodity price volatility.”

On top of that, the fact that CEO Richard Kinder is buying up stock like a fool (more than $100 million in purchases in just two years) is extremely bullish for KMI stock, as insider buying is a better indicator than insider selling.

But the real kicker is KMI’s dividend, which clocks in at 4.4% annually. That’s hard not to like, especially since the company expects to increase it by about 10% annually for the next five years.

Our Semifinal Pick: AAPL

KMI is a wonderful stock, and it’s very appropriate for more conservative investors just looking for some steady income to tide them over. As my colleague Charles Sizemore said in KMI’s previous matchup against Disney,

“If the market were to close for the next decade and you were stuck holding whatever stocks you own today, you’d be in good shape holding Kinder Morgan.”

But the market won’t close for a decade, and for some people “good shape” isn’t all they’re looking for from their portfolio. The fact of the matter is, AAPL is a unique, almost one-of-a-kind hybrid between a growth stock and a dividend stock, and it still has massive potential for capital appreciation going forward.

After all, AAPL stock trades at a lower P/E than the S&P 500, despite earnings that are forecast to roar 34% higher this fiscal year. With Apple Pay, Apple TV, Apple Watch, and eventually an Apple car all in the works, AAPL has too many catalysts in its pipeline for KMI to contend with.

Head back to the Stock Market Madness bracket to vote for your favorite stocks and check out other previews!

As of this writing, John Divine was long shares of AAPL stock, GOOG stock, and GOOGL stock. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.


Article printed from InvestorPlace Media, https://investorplace.com/2015/03/apple-aapl-vs-kinder-morgan-kmi-stock-market-madness/.

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