Investors are either interested in growth, income, or a combination of both. An investment that displays both growth and income is truly a rare breed, and one that investors would be wise to get to know better. Thankfully, there are such investments that can be found under one umbrella—the Kinder Morgan group of securities.
If you’re an investor interested in the energy sector, there’s likely a Kinder Morgan security for you. Each has its own unique characteristics, and each probably appeals to a different type of investor. Read on to find out why you should give serious consideration to one (or more) of the Kinder Morgan family of stocks.
Four publicly traded entities to consider
The Kinder Morgan umbrella of companies involves four investments: Kinder Morgan Energy Partners LP (NYSE:KMP), Kinder Morgan Inc (NYSE:KMI), Kinder Morgan Management, LLC (NYSE:KMR), and El Paso Pipeline Partners, L.P. (NYSE:EPB). In all, the group collectively holds an enterprise value of nearly $110 billion.
Kinder Morgan Energy Partners LP (NYSE:KMP) serves as the pipeline and storage facility operator, and is one that retail investors likely know the best because it carries the highest yield of the group. Its very structure as a Master Limited Partnership makes ownership ideal for individuals instead of institutions. That, in addition to its huge 6.5% distribution, make it very popular among retail investors.
An equally impressive MLP
El Paso Pipeline Partners, L.P. (NYSE:EPB) is very similar to Kinder Morgan Energy Partners LP (NYSE:KMP), as both are Master Limited Partnerships that own and operate oil and gas pipelines and storage facilities. The major difference, of course, is that El Paso Pipeline Partners, L.P. (NYSE:EPB) is involved primarily in natural gas. Kinder Morgan Inc (NYSE:KMI) purchased El Paso Pipeline Partners in 2011 for $21 billion in a move Kinder Morgan Inc (NYSE:KMI) CEO Richard Kinder called a ‘once in a lifetime opportunity.’
Natural-gas demand is on the upswing, and Kinder Morgan Inc (NYSE:KMI) is intent on being there to fulfill the need. Production of natural gas has risen strongly in the United States in recent years, but many promising shale plays lacked the necessary pipeline capacity. That’s why Kinder Morgan was quick to step in and snatch up El Paso, and the integration possibilities are indeed attractive. Kinder Morgan Inc (NYSE:KMI) will now be able to transport natural gas across the country, no longer being limited to one corner of the country or another.
Kinder Morgan (KMI) owns the general partner and limited partner interests in both Kinder Morgan Energy Partners LP (NYSE:KMP) and El Paso.
Don’t want the hassles of a K-1? No problem
Of course, many investors shy away from the potential tax complications of an MLP because of the K-1 statement that they must deal with. Certain items, like unrelated business taxable income (UBTI), make for difficulties come tax time. In light of this, Kinder Morgan Inc (NYSE:KMI) decided to create a new vehicle which avoids the hassles of a K-1 statement.
This is how Kinder Morgan Management, LLC (NYSE:KMR) came to be. Institutions quickly took note of the strong performance of Kinder Morgan as a whole, and wanted exposure without the ownership restrictions of Kinder Morgan Energy Partners LP (NYSE:KMP).