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

Biotech Insider Alert - $6 Stock To Hit $40

$200 Million Dollar Healthcare Hedge Fund's #1 Best Idea Right Now

The best healthcare hedge fund out there right now is one of the largest shareholders in this biotech stock. The fund returned more than 20% in each of the last 2 years with a virtually fully hedged portfolio, and it's sending out a BUY signal on this biotech stock. Get your FREE REPORT today (retail value of $300)

This is a FREE report from Insider Monkey. Credit Card is NOT required.
Click here to Read Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 74 percentage points in 2.5 years. Our beta is only 1.2 (download a FREE newsletter and see the details inside)

Lists

Best Selling Magazines in the World

Shortest People in History

The Most Celebrated Holidays in the World

Most Expensive Handbag Brands in the World

Top Selling Comic Book Issues of this Century

The Most Powerful Women in Politics

Best Paid DJs

Most Rebellious Female Artists

Best Paid TV Actresses of 2014

Best Paid Actors of 2014

Most Expensive Horses in the World

Tallest People Ever

Most Encouraging Feminist Celebrities

Best Paid Supermodels of 2014

Top 10 Suburbs for Retirement in 2015

10 Wealthiest Cities in America

Top 10 TED Talks for Entrepreneurs

Best TED Talks on Education

25 Most Dangerous Places to Live in America

Top 10 Ski Resorts in the United States – 2014 List

Top 10 Most Remote Places in the World

Most Visited Museums in the United States

Wealthiest Photographers in the World

Most Famous Gay Athletes

The World’s Most Famous Circuses

Best Hair Stylists

Most Popular NASCAR Drivers

The Best Romance Movies of all Time

The Most Wanted Drug Lords

The Oldest Money Managers

The Greatest Directors in the World

Largest Animals in the World

World’s Most Expensive Desserts

Best Selling Comic Books of All Time

A-list Actors who Sabotaged Their Career

Rappers With a College Degree

The Best Jazz Albums of all Time

The Most Influential Jazz Musicians

The World’s Most Famous Photographers

The Best Oscar-Winning Songs

Most Influential Choreographers Ever

Most Expensive Department Stores in the World

The Most Expensive Stolen Paintings in the World

The World’s Most Expensive Teas

Top Oscar Record Holders

The Most Expensive Flowers in the World

Countries With a Booming Film Industry

Most Expensive Cupcakes in the World

Uncommon European Escapes

The Most Stolen Artists in History

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 129% in 2.5 years!! Wondering How?

Download a complete edition of our newsletter for free!