Kinder Morgan Inc (KMI)’s Payout Coverage Will Still Be Thin After Reorganization for Conservative Income Investors: Josh Peters

Ever since Kinder Morgan Inc (NYSE:KMI) has announced its reorganization of buying three of its associated companies. The Street has been divided upon whether this is good for the shareholders of the respective companies or not.  Kinder Morgan Inc (NYSE:KMI)’s shareholders had a good ride while the company continued to give them a good payout, but will the going be as good after the reorganization? Josh Peters, editor of Morningstar DividendInvestor, answered that question recently in a video on Yahoo! Finance.

Kinder Morgan Inc (NYSE:KMI)

“Well, part of the way Kinder structured its organization in the past is, you have a general partner Kinder Morgan Inc (NYSE:KMI) at the top of the heap, it in turn is collecting incentive distributions from several subsidiary partnerships Kinder Morgan Energy Partners LP (NYSE:KMP) and El Paso Pipeline Partners, L.P. (NYSE:EPB). And, effectively, with each new unit that these two partnership issues in order to fund their growth, that distribution is being paid to the new unit holder and an additional distribution almost as large is being upstream back to Kinder Morgan Inc (NYSE:KMI) [...],” Peters said.

Kinder Morgan Inc (NYSE:KMI) has been one of the pioneers of the Master Limited Partnership (MLP) financial structure, it helped popularize this structure way back in the 90′s. A host of companies related to the oil and gas business saw the benefit of the MLP structure over the years and adopted it. The MLP structure basically allows companies to pass on their profits directly to the shareholders without paying corporate taxes on them.

Peters feels that although this arrangement was very lucrative for the general partners in the company, it proved very cumbersome for many of the subsidiary companies to grow under this arrangement. He believes that the biggest benefit of this reorganization would be that the additional profit distribution can be curtailed and the cost of capital for the companies to grow would be significantly reduced. According to Peters, who will end up being the loser in the transaction is a ‘matter of opinion’, but his calculations show that the income Kinder Morgan Energy Partners LP (NYSE:KMP) and El Paso Pipeline Partners, L.P. (NYSE:EPB) used to receive would drop following this reorganization.

Disclosure: None

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

Qihoo 360 Technology Co Ltd (QIHU), Actavis plc (ACT), Yahoo! Inc. (YHOO) Among 20 Long Ideas from Sohn Canada

The 10 Laziest Countries in the World

The 10 Most Polluted Countries in the World

The 10 Most Dangerous Cities in America 2014

The Top 10 Gold Producing Countries in the World

The 10 Tallest Buildings in the World

The 10 Richest Stand Up Comedians in the World

The 10 Fattest Countries in the World

The 5 Best Summer Jobs for Teens

The 10 Most Religious Countries in the World Keeping the Faith

The 10 Most Educated Countries in the World

The 10 Most Popular Cell Phones in the World

The 10 Drunkest Countries in the World

The 10 Most Expensive Private Schools in the World

The 10 Smallest Countries in the World

Walking Dead Season 5 Spoilers You’ll Wish You Didn’t Know

The 10 Poorest Countries in the World

The 10 Greenest Countries in the World

The Top 10 Countries with the Highest Population in the World

The 10 Most Visited Countries in the World

The Top 10 Star Wars Characters in the Iconic Series

The 10 Most Expensive Android Phones in the World

5 Reasons Why The Illuminati Is Real and a Threat to Society

The 6 Scariest Halloween Costumes Ever Screamed At

The 4 Biggest Hedge Fund Managers in the World Today

The 15 Most Densely Populated Countries in the World

The 10 Biggest Tea Drinking Countries in the World

Top 6 Ways to Improve Your Checkout Process and Close Sales

The 5 Most Profitable Online Businesses You Can Start Today

The 20 Most Profitable Hospitals in the US

The 5 Most Profitable Home Businesses to Start

The 7 Teams that Will Win the Stanley Cup in 2015

The Top 10 Most Expensive Digital Cameras to Snap Stunning Shots With

The 10 Highest Quality Fast Food Restaurants In America Today

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!