Replies to post #858 on Kinder Morgan Inc (KMI)

[eFinanceMarkets]

$KMI Kinder Morgan gains on shareholder-friendly moves; one analyst has doubts

Kinder Morgan (KMI +4.6%) marches higher after unveiling plans to significantly raise its dividend and buy back shares.

The dividend increase came as KMI reported Q2 profits of $337M, up a bit from $333M in the year-ago period, and distributable cash flow of $1.02B was off slightly from $1.05B in Q2 2016, driven by lower contributions from Southern Natural Gas as a result of last year's 50% sale of the pipeline.

Jeffries' Chris Sighinolfi - who rates the stock Neutral with a $20 price target - raises questions about the buyback, saying "KMI has no formal cadence of anticipated repurchase activity, no established target price for the buybacks, and will not be 'mechanically buying' at the market."

The analyst says he is "confused about the relative attractiveness of repurchasing stock at ~11-12x EBITDA vs. investing in incremental organic expansions at ~6.9x, the stated average capital-to-EBITDA multiple of KMI’s backlog."

[benfrankledger]

So little profit improvement is now priced into the stock, that the downside risk is nowhere near the upside potential.