- The “mid stream” industry has endured a challenging few years, but perhaps things are about to turn around.
Companies like KMI and EPD seem well positioned to benifit from massive $800 billion in growth.
Analysts view KMI as a good value dividend stock.
Continuing our series on dividend stocks. The focus is on dividends for a couple of reasons. One, they can become a valuable source of income in one’s quest to financial independence. Most millionaires in the US have multiple sources of income that they put together over many years. These can be from pensions, 401k disbursements, side gigs, dividends, rental properties, bonds, Real Estate Investment Trusts, IRA’s, small business ventures, publishing, intellectual property, etc. Another reason to focus on dividends in my opinion is a mental strategic reason that I believe will become important over the next couple of years as the market changes. Many folks believe we are about to enter a more turbulent time for equities and the stock market. One main reason is that the Fed may be easing off the “easy money” policies of the last decade. No one knows for sure of course, but it is possible. When things get choppy, I worry less about the individual stock price and focus on the fact that the stock pays a solid dividend that can continue to grow and be sustained. So in other words, if I believe in XYX company, they have a proven track record, they have a moat, they have assets, they are selling a product the world requires/wants and they pay a good dividend. If all this is true, then I do not care as much if the stock price goes down from $50/share to $25/share, each quarter or month they are spinning off a small amount of their income to shareholders. Up front word of caution. We are not stock pickers and do not even pretend to be on TV. In fact, I think stock picking in general is a fool’s errand. Only two guys in the world are actually really good at it, their names are Warren Buffett and Ray Dalio. I believe most folks should place money in diversified low cost index funds, find their specific asset allocation between stocks and bonds, put it on autopilot and not touch it. In fact that is what I do for 90% of assets. But, I do enjoy “playing around” with 10%. Taking calculated risks, learning about new companies doing incredible things, etc. That is where the process of looking at an individual dividend stock comes into play. Jerry likes to play around with small amounts of money on puts/calls, etc. You get the idea. The bottomline for me is that I do the 10% to learn new things and generate some dividend income. Kinder Morgan Inc. (Ticker KMI) KMI operates and maintains pipelines and terminals that transport natural gas, gasoline, oil, carbon dioxide (C02) and other products. They also handle ethanol, coal and steel. In general, there is huge demand for new pipelines in North America to handle growing supplies of natural gas, etc. The modern world around us is based on natural gas and other materials that go into millions of products. We would be blown away to walk around our modern homes and point out the hundreds of items that are all composed of natural gas and oil. Kinder Morgan is the largest energy infrastructure company in North America. They basically own all the “freeways” that deliver the materials to points of distribution and consumption. In fact, they own about 85,000 miles of pipeline “freeways”! This is commonly known as midstream infrastructure. KMI is on track to increase their dividend yield in 2020. They hiked the dividend by 60% earlier this year. I like this dividend stock because the price is relatively low at $18/share and pays a 2.77% dividend yield. Yes, the economy will go up and down, but energy infrastructure is quite valuable in terms of building and maintaining the modern world. All this said, there are also risks to these companies. They have taken in debt to expand and this could be an issue in the next recession. All investments have some kind of risk. Enterprise Product Partners (EPD) EPD is very similar to KMI and another dividend play to consider in the same sector and business. Again, the modern world is built on the product that flows through EPD and KMI infrastructure. Somehow the product needs to be transported efficiently, cleanly and safely. EPD trades at $29/share and boasts a 6.29% dividend yield at .43 per share. THIS IS NOT STOCK PICKING ADVICE! INVEST AT YOUR OWN RISK AND SEE A PROFESSIONAL INVESTMENT ADVISOR. THIS ARTICLE IS MEANT FOR ENTERTAINMENT AND INFORMATIONAL PURPOSES. I AM LONG KMI.