We recently compiled a list of the 12 Best Dividend Stocks Under $30. In this article, we are going to take a look at where Kinder Morgan, Inc. (NYSE:KMI) stands against the other dividend stocks under $30.
Dividend stocks have remained a focal point for investors, especially amid market volatility and the growing need for steady cash flow. Over time, many investors have turned to dividends as a financial cushion for uncertain periods. According to a recent report by J.P. Morgan Wealth Management, dividend stocks are typically priced lower compared to the broader market. Moreover, high-quality dividend stocks tend to be less volatile, experiencing about 80% of the market’s overall fluctuations. This suggests that they offer a more stable investment option while potentially being available at a more attractive valuation.
Also read: 7 Cheap Quarterly Dividend Stocks to Invest in
This trend has drawn the attention of income-focused investors, leading to an increase in dividend income as a key component of personal earnings. According to a report by S&P Dow Jones Indices, dividend income has grown from 2.68% in Q4 1980 to 7.88% in Q2 2024, highlighting its increasing role as a source of income. The report also pointed out that since 1936, dividends have contributed to more than a third of overall equity returns, with capital gains making up the remainder.
The dividend growth approach has proven effective for long-term investors, as these stocks have delivered solid returns over time. When adjusted for inflation, dividend growth has outpaced rising prices, reinforcing their appeal. A report by WisdomTree noted that from 1957 to 2023, dividends increased at an average annual rate of 5.7%, exceeding inflation by more than 2%. The report also highlighted that dividend reductions were rare, occurring in only six of the past 64 years, and only once dropping more than 5%. In contrast, stock prices declined in 18 of those years, with the steepest drop exceeding 40% and an average decline of over 11%. Stock prices also showed more than twice the volatility of dividend cash flows, as short-term fluctuations are often driven by market sentiment, while long-term value is supported by stable cash flows.
Over the years, US companies have consistently raised or maintained their dividend payouts, reflecting investor preferences. According to J.P. Morgan’s Outlook 2025 report, US profit margins remain strong, hitting all-time highs. In this decade, companies in the broader market have returned nearly 75% of their annual earnings to shareholders through dividends and share buybacks, compared to just 50% in the 2000s. While concerns about the concentration of the index in major tech firms persist, the report forecasts positive earnings growth across every sector in the broader market for 2025, a trend not seen since 2018.
Tech stocks, traditionally associated with growth, are increasingly becoming dividend payers in response to investor demand. Just a few years ago, the idea of major tech companies offering dividends seemed unlikely. However, the pool of potential dividend stocks is expanding, attracting significant capital that has been sitting in money market instruments to hedge against interest rate risks. Here are some remarks from Dividend Research Analyst Juan Pablo Albornoz told S&P Global Market Intelligence:
“Providing a dividend is a way for these profitable tech companies to prove to the market and their shareholder base that they can provide sustained regular shareholder return on a regular and predictable basis.”
This approach benefits investors who can now combine investments in both growth and income-generating stocks.
Our Methodology:
For this list, we used a Finviz stock screener to find dividend stocks with share prices below $30 as of the close of January 30. From the initial list, we selected 12 companies with dividend yields above 4% and a history of regular dividend payments, indicating sustainable dividends. The stocks are ranked according to their share prices. We also considered hedge fund sentiment around each stock using Insider Monkey’s data for Q3 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
Aerial view of an oil and gas pipeline, spanning vast landscapes.
Kinder Morgan, Inc. (NYSE:KMI)
Share Price as of the Close of January 30: $28.10
Kinder Morgan, Inc. (NYSE:KMI) is a North American energy infrastructure company that owns and operates oil and gas pipelines and terminals. The company is experiencing growth driven by rising demand, which has led to better utilization of its existing pipelines and stronger contract renewal rates. The company is also seeing gains from high-return expansion projects and last year’s $1.8 billion acquisition of STX Midstream.
Kinder Morgan, Inc. (NYSE:KMI) is confident in its performance, expecting a 9% rise in its adjusted earnings per share this year, supported by reduced hurdles from asset sales and major contract renewals, along with the benefits of recent expansion initiatives, including the late-year acquisition of STX Midstream. In addition, its long-term growth outlook has notably strengthened. The company has recently secured several large natural gas pipeline projects, set to begin operations in 2028, while a series of smaller projects slated for commercial service in the near term has further reinforced and extended its growth trajectory. In the past 12 months, KMI has delivered a 64.3% return to shareholders, significantly outperforming the broader market.
Kinder Morgan, Inc. (NYSE:KMI) also has a strong cash position that helps the company to comfortably fund its dividends. In the most recent quarter, the company generated $1.5 billion in operating cash flow and $0.7 billion in free cash flow. On January 23, it declared a quarterly dividend of $0.2875 per share, which was in line with its previous dividend. It is one of the best dividend stocks on our list as the company has been growing its dividends for the past seven years. The stock has a dividend yield of 4.14%, as of January 30.
At the end of Q3 2024, 42 hedge funds tracked by Insider Monkey held stakes in Kinder Morgan, Inc. (NYSE:KMI), up from 41 in the previous quarter. The consolidated value of these stakes is over $1.3 billion.
Overall KMI ranks 12th on our list of the best dividend stocks under $30. While we acknowledge the potential for KMI as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than KMI but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.