KMP Pumps Profit
Research for Online Investors

by John Dalt

12/09/09

Kinder Morgan Energy Partners (KMP) is our oldest holding in the Long-Term Portfolio.  Why do we like it?  As a partnership they have to pay out 90% of their income to maintain their tax status.  Some of the dividend income is tax sheltered by depreciation, and none of it is double-taxed.  Here is our recommendation from one-year ago.

Kinder Morgan is a master limited partnership paying a quarterly dividend. The third quarter dividend was $1.02 per share currently yielding 9.2%. They have increased their dividend 34 times since 1997! This last dividend increase came with business interruptions from two hurricanes and damage from three fires at company terminals.

KMP is the largest independent owner/operator of products pipelines in the U.S., and they are becoming bigger. They are building a 1678-mile long pipeline from Wyoming to Ohio that will be operational in June 2009 to carry Natural Gas to the Eastern markets. They are building a 136-mile pipeline in Louisiana to offload Liquefied Natural Gas from an import terminal. They recently completed a 700-mile pipeline that transports crude from Alberta to British Columbia and Washington State. They have also completed a 500 mile pipeline from Oklahoma to Alabama that will begin service in February 2009. This company is growing the top line and the bottom line.

Lower prices for energy do not impact KMP. They are involved in transportation not production. Demand destruction could affect the volume but they provide the lowest priced transportation option and are involved in much more than crude. Natural Gas and Carbon Dioxide transport (47% growth) and their terminal operations (21%growth) provide stability and a good pair trade against crude and distillates transportation. KMP also has terminals that handle coal (up 9%) in Virginia and surrounding states.

With the election of Oh! BAMA! And the promised tax increases on dividends and long-term capital gains; this is a stock you can leave to your kids. Due to its limited partnership structure, you only pay income tax on a portion of the dividend you receive! You pay tax on the balance of the dividends received if and when you sell the stock. If you put it in your 401k or IRA so much the better.

In the last year, our subscribers have $4.20 in dividends and the stock has appreciated for a combined return of 42% from our buy price.  They have completed the projects mentioned in our recommendation and expanded with other acquisitions.  KMP is a great example of the quality companies we own in Galt’s Long-Term Portfolio.  If you would like exact recommended buy prices on new and existing holdings, and the safety of our monitoring and alert service, subscribe to Galt’s Long Term Portfolio.

The administration has a new plan, outlined by Maobama, to use TARP funds for employment programs.  A brilliant political move.  Maobama’s constituents believe it is their turn to get some of that money.  I wonder if I could get away with this at the bank, borrow money and rather than pay it back give it away to someone else with no requirement to pay the bank.

This will require congressional approval, as they have to authorize the use of TARP funds for other uses than ‘saving the financial system.’  This avoids the unpleasant vote for more spending, they are just redirecting spending that has already been approved, under a previous administration.

I believe that prediction of dire consequences of global warming, no matter how much or how little are human-caused, is much tougher than predicting the effects of the coming train wrecks caused by Social Security, Medicare, ObamaCare, and the rest of the deficit spending. I don't see how so many people can care about the former and not about the latter .---Subscriber D.E.

You are absolutely right. I have referenced Michael Crichton a few times in my newsletters.  He was a scientist, and medical doctor, He asked, "show me the science."  The global warming zealots cannot.  Science is repeatable, and can be proved.  The unfunded mandates and huge budget deficits are provable and catastrophic.  We are headed for Armageddon.  John Dalt

“We may get to the point where the only way of saving the world will be for industrial civilization to collapse.” ----Maurice Strong
Former commissioner of the U.N. World Commission on Environment and Development

The information presented in this newsletter is based on generally available news releases, corporate filings, current events, interviews and the editor’s opinions.  It may contain errors and you should not make investment decisions based solely on what you believe you have read here.  Do your own research, it is your money.  If you lose it, it is your responsibility, not ours or your grandmothers!  The editor may or may not have a position in any securities discussed.  The editor may have held a position in a security earlier, or in the future

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