The graph below belongs in the “what where they thinking category”.
After Tuesday’s dividend massacre, it plain as day that Kinder Morgan (KMI) wasn’t the greatest thing since slice bread after all. That is, a “growth” business paying rich dividends out of rock solid profit margins and flourishing cash flow.
In fact, it was just a momo stock on a borrowing spree.
During the 27 quarters since the beginning of 2009, the consolidated entities which comprise KMI generated $20.8 billion of operating cash flow, but spent $24.3 billion on CapEx and acquisitions.
So the “growth” side of the house ended-up in the red by $3.5 billion. Presumably that’s because it was “investing” for long haul value gains.
But wait. It also had to finance those juicy dividends, and there was a reassuring answer for that, too. The payout was held to be ultra safe owing to KMI’s business model as strictly a toll gate operator in the oil and gas midstream, harvesting risk-free fees from gathering systems, transportation pipelines and gas processing plants.
Accordingly, even when its stock price was riding high north of $40 per share, the yield was 5%. So over the last 27 quarters KMI paid out $17.3 billion in dividends from cash it didn’t have.
It borrowed the difference, of course, swelling its net debt load from $14 billion at the end of 2009 to $44 billion at present. And that’s exactly the modus operandi of our entire present regime of Bubble Finance.
Kinder Morgan is the poster boy.
KMI data by YCharts
Yes, you can chalk this off to another “lesson learned” in the Wall Street casino. After all, some definable group of investors and speculators thought they owned $98 billion of market cap a few months ago, and now their accounts are suddenly $60 billion lighter—–including about $7 billion of bottled air that evaporated from the net worth of its founder and indefatigable promoter, Richard Kinder.
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