Best of Breed Investing: Kinder Morgan Energy Partners LP (KMP)

Joint Venture

Kinder Morgan entered into a joint venture with Martin Midstream Partners L.P.(NASDAQ:MMLP) in 2012. Martin Midstream Partners operates terminals and storage facilities, and offers natural gas, marine transportation, and sulfur services to the energy industry. This company focuses primarily in the Gulf Coast region of the United States.

The joint venture was to build a multi-commodity rail terminal in west Texas with Watco Companies, the largest privately held short-line railroad company in the United States. The terminal began operations on May 1, 2012, and now provides a wide array of services to the booming oil and gas industry in the Permian Basin. Some of these services include crude oil hauling, storage, trans-loading, and marketing. Kinder Morgan and Martin Midstream are now in talks to develop other operations in surrounding counties, such as a frac sand unit train terminal. This relationship is strong and should flourish for years to come, or Kinder Morgan may decide to acquire them like they did with Copano Energy.

Growth

They reported fourth quarter earnings on Jan. 16 and earnings per share came in at $0.75, beating analyst expectations of $0.68. Total revenue for the quarter increased 59% year-over-year to $3.079 billion. Total revenue for 2012 rose to $9.973 billion compared to $7.943 billion in 2011.

In 2013, Kinder Morgan expects to earn $2.57 per share. This would represent an 11.3% growth from 2012. In 2014 and 2015, they expect earnings of $2.81 and $3.11 per share. These estimates can easily be exceeded due to increased shipments of gas, as was the case for the fourth quarter. This earnings growth alone makes this a stock worth owning.

Dividend Growth

Kinder Morgan Energy Partners has one of the highest dividends and strongest track record of raising its dividend you will find. They currently pay out $5.16 annually, or 5.96%. This dividend has been raised for the last 17 consecutive years, including the last four consecutive quarters. With their growing earnings and performance, I think Kinder Morgan can continue to raise this dividend for over 50 years like Coca Cola.

Bottom Line

This is the best pipeline company and dividend play in the market. It currently trades at $86.55, 4.5% below its 52 week high of $90.60. With the strong earnings growth, high dividend, dividend growth, increased shipments, and great moves by management, Kinder Morgan belongs in your portfolio. It will outperform this market, so I am initiating an outperform on CAPS. I am looking to pick up shares on any weakness because I believe this stock is heading to $100. Kinder Morgan Energy Partners is a long term BUY.

The article Best of Breed Investing: Kinder Morgan Energy Partners originally appeared on Fool.com.

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