Why Are Investors Piling Into These 4 Stocks Today?

Next up on our list is midstream oil and gas giant Kinder Morgan Inc (NYSE:KMI), whose shares are up by 7.5% after the company announced that it will pare its quarterly dividend distribution by 75% to $0.125 per share, from the previous $0.51 per share. Investors are buying because the dividend cut is less than expected (some thought Kinder Morgan would cut the dividend to $0.01 per share) and because management’s move will provide enough cash flow to finance the company’s growth capital expenditures without the need to raise additional money from the equity or debt market. Any equity raise at current prices would have harmfully diluted shareholders and any debt raise would likely have removed Kinder Morgan’s investment grade status. Incidentally, Kinder Morgan’s dividend cut prompted Moody’s to upgrade the company’s debt outlook to ‘stable’ from the previous ‘negative’, meaning the company will keep its investment grade status for the foreseeable future.

Perhaps following in Kinder Morgan’s footsteps, Freeport-McMoRan Inc (NYSE:FCX) suspended its quarterly dividend of $0.20 per share and announced that it will reduce its oil and gas CapEx to $3 billion over the next two years, down from the previously planned $4 billion. Because of the moves, the company estimates its consolidated operating cash flow will more than cover its capital expenditures budget for 2016 (assuming $2/lb for copper and $45 for Brent). Investors are buying because Freeport-McMoRan Inc (NYSE:FCX)’s moves give the company more liquidity to survive the commodity down-cycle. Hedge funds have been more optimistic about the stock recently, with 44 elite funds long Freeport at the end of the third quarter, up from the 41 funds long the stock at the close of the second quarter. Shares of the commodity producer are now up by 10% in morning trading.

Disclosure: None