Industry Overview - The U.S. is entering an unprecedented period of power demand, with electricity demand expected to grow more than 10 times faster over the next decade compared to the previous 10 years, driven by electrification in heating, transportation, electric vehicles, and AI data centers [1] Natural Gas Demand - Natural gas is projected to play a crucial role in supporting the surge in power demand, with an estimated additional consumption of 20 billion cubic feet per day (bcf/d) by 2030, increasing from 108 bcf/d last year, excluding an additional 10 bcf/d from data centers [2] Kinder Morgan - Kinder Morgan operates the largest natural gas transmission network in the U.S., with 66,000 miles of pipelines transporting over 40% of the country's gas production and owning 15% of the natural gas storage capacity [3] - The company has $5.1 billion in expansion projects, with $4.3 billion allocated for new natural gas infrastructure, including a $1.7 billion investment to expand a pipeline system to supply 1.2 bcf/d of additional gas to Southeast markets by late 2028 [4] - Kinder Morgan's growth projects are expected to enhance cash flow and dividends, currently yielding over 4%, potentially turning a $1,000 investment into over $40 of annual dividend income [5] Williams Companies - Williams operates over 33,000 miles of pipelines, handling about a third of the U.S. gas demand, with its notable Transco pipeline being the largest by volume [6] - The company has numerous gas infrastructure projects underway, expected to provide visibility into earnings growth, with an anticipated annual growth rate of 5% to 7%, supporting a similar growth rate in its more than 3% yielding dividend [7] - Williams has the potential to invest over $10 billion across 30 projects that could come online between 2026 and 2032, which would further fuel earnings and dividend growth [8] Targa Resources - Targa Resources is a leading midstream infrastructure company with significant assets in natural gas gathering, processing, and export capabilities, particularly in the Permian Basin [9] - The company has several expansion projects, including six natural gas processing plants in the Permian expected to come online by 2026, positioning it for growth in the region [10] - Targa anticipates returning 40% to 50% of its growing cash flows to investors, with a target of a 33% increase in its 1.5% yield by 2025 and plans for opportunistic share repurchases [11] Conclusion - The expected surge in power demand is set to drive robust growth in natural gas demand, providing significant opportunities for gas infrastructure companies like Kinder Morgan, Williams, and Targa Resources to expand their systems and enhance earnings and dividends, leading to strong total returns for investors [12]

Core Insights - The S&P 500 has increased by 35% over the past year, leading to a decline in its dividend yield from 1.7% to approximately 1.2%, the lowest in over 20 years [1] - A $10,000 investment in the S&P 500 now yields about $120 in dividends, compared to $170 a year ago, indicating a significant drop in income generation [2] Realty Income - Realty Income offers a dividend yield of over 5.5% and has a history of paying 653 consecutive monthly dividends, with 127 increases since its public listing in 1994, growing at a 4.3% compound annual rate [3][4] - The company distributes about 75% of its cash flow as dividends and retains the rest for new investments, supported by a strong balance sheet [4] - Realty Income plans to invest approximately $3.5 billion in new properties this year and has acquired Spirit Realty for $9.3 billion, which is expected to increase cash flow per share by nearly 5% [5] Kinder Morgan - Kinder Morgan has a dividend yield of nearly 4.5% and has increased its payouts for seven consecutive years [6] - The company generates stable cash flow, with 68% of earnings being take-or-pay or hedged, ensuring revenue regardless of commodity prices [6] - Kinder Morgan pays out just over 50% of its cash flow as dividends, retaining the rest for expansion projects, with over $5 billion in secured projects expected to come online by the end of 2028 [7] Verizon - Verizon's current dividend yield exceeds 6.5%, with 18 consecutive years of annual payout increases, the longest in the U.S. telecom sector [8] - The company generated $26.5 billion in cash flow from operations in the first nine months of the year, covering its capital expenditures and dividend payouts [9] - Verizon is heavily investing in expanding its 5G and fiber networks, including a $20 billion acquisition of Frontier Communications, which is expected to enhance earnings through cost savings [10] Investment Opportunities - Realty Income, Kinder Morgan, and Verizon provide significantly higher dividend yields than the average S&P 500 stock and have strong records of increasing payouts, making them attractive options for income-focused investors [11]

Core Insights - Kinder Morgan's Q3 2024 earnings report showed adjusted earnings per share of 25 cents, missing the Zacks Consensus Estimate of 27 cents, with total revenues of $3.7 billion also falling short of the expected $3.8 billion [2] - The company announced a quarterly cash dividend of 28.75 cents per share, reflecting a 2% increase from Q3 2023 [3] - Despite lower commodity prices impacting performance, Kinder Morgan projects a net income of $2.7 billion for 2024, a 15% increase from 2023, along with a 2% increase in dividends [10][11] Financial Performance - Q3 2024 adjusted earnings per share were flat year over year, while total revenues decreased from $3.9 billion in the prior-year quarter [2] - Distributable Cash Flow (DCF) remained stable at $1.09 billion compared to the same quarter last year [8] - As of September 30, 2024, Kinder Morgan reported $108 million in cash and cash equivalents and long-term debt of $29.8 billion [9] Segment Analysis - Natural Gas Pipelines segment saw adjusted EBDA increase to $1.28 billion from $1.19 billion year over year, driven by contributions from the Texas Intrastate system and STX Midstream acquisition [4] - Product Pipelines segment's EBDA decreased to $277 million from $313 million due to lower commodity prices [5] - Terminals segment generated EBDA of $267 million, up from $259 million, benefiting from liquid terminal expansions and increased volumes [6] Operational Highlights - Total operating costs and expenses decreased to $2,684 million from $2,969 million, while operations and maintenance expenses rose to $790 million from $738 million year over year [7] Guidance and Outlook - For 2024, Kinder Morgan expects Adjusted EBITDA of $8.16 billion and DCF of $5 billion, both reflecting an 8% year-over-year increase [10] - Adjusted EBITDA and Adjusted EPS are now projected to be about 2% and 4% below budget due to lower commodity prices and delays in RNG facilities [11] - The company holds a Zacks Rank 3 (Hold), indicating an expectation of an in-line return in the coming months [14]

Group 1: Realty Income - Realty Income is a REIT focused on delivering dependable monthly dividends that have increased for 30 consecutive years, including 108 straight quarters [3][4] - The current dividend yield is over 5%, significantly higher than the S&P 500's average yield of less than 1.5%, translating to about $5 of annual passive income for every $100 invested [4] - The company expects to grow its adjusted funds from operations (FFO) by approximately 4% to 5% per share annually, driven by rent growth and acquisitions [5][6] Group 2: Kinder Morgan - Kinder Morgan operates the largest natural gas pipeline system in the U.S. and has a diverse portfolio of midstream assets that generate stable cash flows [7][8] - The company has a backlog of $5.2 billion in expansion projects, including a $1.7 billion natural gas pipeline expansion expected to enter service in late 2028 [9] - Kinder Morgan has increased its dividend for the past seven years, supported by its stable cash flow and ongoing expansion projects [9] Group 3: Verizon Communications - Verizon has achieved its 18th consecutive annual dividend increase, with a current yield of 6.5%, marking the longest streak in the U.S. telecom sector [10] - The company generates excess free cash flow, which it uses to strengthen its balance sheet while covering capital expenses and dividends [10] - Verizon plans to acquire Frontier Communications in a $20 billion cash deal, which is expected to enhance its fiber offerings and grow earnings, allowing for continued dividend increases [11] Group 4: Investment Summary - Realty Income, Kinder Morgan, and Verizon are highlighted as attractive options for passive income due to their high-yielding dividends and solid financial metrics, with visible growth prospects for continued dividend increases [12]

Join iREIT on Alpha today to get the most in-depth research that includes REITs, mREITs, Preferreds, BDCs, MLPs, ETFs, and other income alternatives. 438 testimonials and most are 5 stars. Nothing to lose with our FREE 2-week trial .We find that uncertainty has an economically significant negative effect on investment. Uncertainty is found to have an economically significant negative effect on employment growth, as well.Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any o ...

The price of natural gas is expected to remain low for the foreseeable future because of the ramping production. A lot of it is available, and the infrastructure is improving rapidly. Natural gas production is driven by the need to decarbonize and a need to power AI, which also drives demand. Demand for natural gas is the salient point because it has to be gathered, processed, stored, and transported, which is where the profits are. Mid-stream operators are insulated from natural gas price swings. They make ...

Core Viewpoint - Kinder Morgan's stock has surged over 41% year-to-date, reaching a nine-year high, significantly outperforming the S&P 500 and the broader energy sector [1] Financial Performance - Kinder Morgan's earnings per share (EPS) increased by 17% year-over-year for Q3 2023, but adjusted EPS growth was flat, with a 5% rise for the nine months ending September 30 compared to the previous year [2] - The company's dividend yield has decreased to 4.6%, still higher than energy sector ETFs [1] Growth Drivers - The stock's rise is attributed to the potential of its project pipeline rather than current operations, with successful acquisitions enhancing its asset base and revenue diversification [2] - Significant acquisitions include Stagecoach Gas Services for $1.23 billion, Kinetrex Energy for $310 million, and North American Natural Resources for $135 million, expanding its renewable natural gas (RNG) portfolio [3] - The recent $1.815 billion acquisition of NextEra Energy Partners' South Texas assets is aimed at capitalizing on natural gas production growth from the Permian Basin [4] Project Pipeline and Future Outlook - The South System Expansion 4 Project, valued at $3 billion, targets increasing demand for natural gas in the southeastern U.S. [4] - Management emphasizes the role of natural gas in powering data centers and supporting AI workflows, indicating a favorable macro environment for infrastructure growth [4] - Kinder Morgan's project pipeline is expected to enhance free cash flow and dividend payments [5] Capital Expenditures and Debt Management - The company has cautiously increased capital expenditures in recent years, maintaining a flat capex over the last five years [6] - Long-term debt net of cash has been reduced by 35% over the past decade, indicating improved financial health [6] Dividend Strategy - Kinder Morgan has gradually increased its dividend, currently at $0.2875 per share, but it remains below pre-cut levels from 2015 [6] - The company must demonstrate that its project pipeline can lead to significant cash flow and dividend growth to maintain its appeal as a passive income investment [7]

Group 1: United Parcel Service (UPS) - UPS is set to report its third-quarter 2024 earnings on October 24, with the stock currently trading less than 9% from its four-year low, indicating a critical period for the company [2] - The company has guided for full-year consolidated revenue of $93 billion, an operating margin of 9.4%, and capital expenditures of $4 billion, reflecting a pullback on spending to cut costs and restore margins [2] - UPS announced new three-year financial targets of $108 billion to $114 billion in consolidated revenue by 2026, with an adjusted operating margin above 13% and $17 billion to $18 billion in free cash flow [3] - The company returned to domestic volume growth for the first time in nine quarters, but the three-year targets may be delayed until 2027, necessitating more concrete measures to accelerate sales growth [3] - UPS currently yields 4.9%, with management prioritizing the maintenance of its current payout [3] Group 2: Kinder Morgan - Kinder Morgan's stock price increased less than 20% from 2016 to the end of 2023, while factoring in dividends, the total return was 77%, still underperforming the S&P 500's 170% total return during the same period [4] - The stock price surged over 40% year to date, and despite this rise, Kinder Morgan still yields 4.6%, indicating a high yield when the stock was previously undervalued [4] - The company has benefited from expectations of increased domestic natural gas demand and opportunities for higher exports, which are vital for justifying new project investments [5] - Concerns about Kinder Morgan's infrastructure assets losing value due to a shift towards renewables have persisted, but there are signs that natural gas will remain part of the energy mix in the medium term [6] - Kinder Morgan generates substantial cash to reinvest in the business and support its growing dividend payout, making it a reliable high-yield dividend stock [6]

Core Viewpoint - Kinder Morgan is optimistic about future growth in the natural gas sector, driven by increasing demand from LNG exports, exports to Mexico, electric generation, and emerging needs from AI and data centers [1][2][3][4]. Industry Outlook - The natural gas market is expected to see strong growth, with an additional 20 billion cubic feet per day (Bcf/d) of demand anticipated by 2030, increasing from last year's level of 108 Bcf/d [2]. - The electricity usage in the U.S. is projected to grow at an annual rate of 2% to 4% through 2030, potentially fueling an additional 3-6 Bcf/d of gas demand, with upside potential exceeding 10 Bcf/d [3]. Company Growth Strategy - Kinder Morgan plans to capitalize on the growing need for natural gas infrastructure, with expectations of consistent growth in EPS, EBITDA, and distributable cash flow (DCF) as new projects come online [4]. - The company has approved significant projects, including a $3 billion South System Expansion 4 Project aimed at increasing capacity by approximately 1.2 Bcf per day, expected to enter commercial service in late 2028 [5]. - An expansion of the GCX system in Texas is also underway, with a project cost of $455 million, expected to be operational by mid-2026 [6]. Demand Drivers - Factors driving increased natural gas demand include population and business migration to the southern U.S., the CHIPS Act, lower raw material prices, and the growth of renewables, which require gas to offset intermittency [7][8]. - Current discussions on power opportunities exceed 5 Bcf per day, with an internal growth estimate of roughly 25 Bcf per day over the next five years [7]. Future Opportunities - The company is positioned to benefit from a rich environment of opportunities for incremental build-out of natural gas infrastructure, with ongoing discussions about various projects [4][9]. - While some large projects are in development, most are smaller initiatives, indicating a broadening opportunity set for the company [8].

Acquisitions and Divestitures - The company acquired the North McElroy Unit for $60 million, which currently produces approximately 1,250 Bbl/d of crude oil[117]. - The company divested its Oklahoma midstream assets for $43 million in February 2024[117]. - The company sold CO assets for $19 million in June 2024, which included interests in multiple units located in the Permian Basin[117]. - The company reported a gain on divestitures of $29 million for the nine months ended September 30, 2024, compared to $9 million in the prior year[154]. Financial Performance - Revenues for the three months ended September 30, 2024, decreased by $208 million (5%) to $3,699 million compared to $3,907 million in 2023[133]. - Operating income increased by $77 million (8%) to $1,015 million for the three months ended September 30, 2024, compared to $938 million in 2023[133]. - Net income attributable to Kinder Morgan, Inc. increased by $93 million (17%) to $625 million for the three months ended September 30, 2024, compared to $532 million in 2023[133]. - Net income for the nine months ended September 30, 2024, increased by $158 million (8%) to $2,026 million compared to $1,868 million in 2023[135]. - Total revenues for the three months ended September 30, 2024, were $2,176 million, a decrease from $2,273 million in the prior year[154]. - Revenues for the three months ended September 30, 2024, were $711 million, a decrease of 17.5% from $862 million in the same period of 2023[162]. - Revenues for the three months ended September 30, 2024, were $3,328 million, with operating income of $880 million and net income of $509 million[213]. Cash Flow and Capital Expenditures - The company generated cash flows from operations of $4,125 million in the first nine months of 2024, slightly down from $4,169 million in the same period of 2023[180]. - Cash used in investing activities increased by $125 million, primarily due to a $168 million rise in capital expenditures driven by expansion projects in the Natural Gas Pipelines business segment[202]. - Cash used in financing activities decreased by $903 million, attributed to a $531 million reduction in cash related to debt activity and a $383 million decrease in cash used for share repurchases[203]. - Sustaining capital expenditures for 2024 are projected to be $1,012 million, while expansion capital expenditures are expected to be $1,748 million, totaling $2,760 million in capital expenditures[191]. - The company anticipates total capital investments of $3,144 million for 2024, which includes $1,166 million in sustaining capital investments and $1,978 million in expansion capital investments[192]. Dividends - The company expects to declare dividends of $1.15 per share for 2024, a 2% increase from the 2023 declared dividends of $1.13 per share[118]. - Declared dividends per share increased by $0.005 (2%) to $0.2875 for the three months ended September 30, 2024, compared to $0.2825 in 2023[133]. - The board of directors declared a quarterly dividend of $0.2875 per share for Q3 2024, a 2% increase over the dividend declared for Q3 2023[182]. - The company’s dividends are not cumulative, meaning unpaid dividends do not accumulate for future payments[207]. - The board of directors will consider various factors, including financial condition and liquidity requirements, when declaring dividends[206]. Debt and Liabilities - Net debt as of September 30, 2024, was calculated at $31,689 million after accounting for cash and cash equivalents, debt fair value adjustments, and foreign exchange impacts[131]. - As of September 30, 2024, the Obligated Group had $31,067 million of Guaranteed Notes outstanding, a slight decrease from $31,167 million as of December 31, 2023[211]. - Total liabilities for the Obligated Group were $40,650 million as of September 30, 2024, compared to $40,628 million at the end of 2023[212]. - Current liabilities decreased from $6,907 million at the end of 2023 to $4,360 million as of September 30, 2024[212]. Operational Metrics - Adjusted EBITDA for the three months ended September 30, 2024, was $1,880 million, an increase from $1,835 million in the same period of 2023[146]. - The company reported a DCF (Distributable Cash Flow) of $1,096 million for the three months ended September 30, 2024, compared to $1,094 million for the same period in 2023[146]. - Total oil production for the three months ended September 30, 2024, was 25.92 MBbl/d, down from 27.67 MBbl/d in the same period of 2023, representing a decrease of 6%[174]. - Realized weighted average oil price for the three months ended September 30, 2024, was $68.42 per Bbl, compared to $67.60 per Bbl in the same period of 2023, an increase of 1.2%[174]. Segment Performance - Adjusted Segment EBDA provides insight into performance trends across business segments and is used for resource allocation and performance assessment[128]. - Natural Gas Pipelines Segment EBDA increased by $115 million (10%) for the three months and $106 million (3%) for the nine months ended September 30, 2024, compared to the prior year[155]. - Midstream's revenue increased by $113 million (35%) for the three months and $75 million (6%) for the nine months ended September 30, 2024, attributed to non-cash mark-to-market derivative contracts and a gain on asset sales[157]. - Segment EBDA for the Products Pipelines decreased by $33 million (10.6%) to $278 million for the three months ended September 30, 2024, compared to $311 million in 2023[164]. - The Crude and Condensate segment experienced a $27 million (30%) decrease in EBDA for the three months ended September 30, 2024, primarily due to a $67 million non-cash impairment in the previous year[164]. - Southeast Refined Products saw a $21 million (26%) decrease in EBDA for the three months ended September 30, 2024, driven by unfavorable commodity pricing[165]. - West Coast Refined Products reported a $15 million (11%) increase in EBDA for the three months ended September 30, 2024, attributed to higher transportation rates and volumes[165]. Regulatory and Compliance - The estimated costs necessary to comply with the EPA's "Good Neighbor Plan" could range from $1.5 billion to $1.8 billion, which may significantly impact the company's operations[197]. - The company has budgeted for sustaining capital expenditures on a bottom-up basis to maintain safe and efficient operations, with additional expenditures expected to produce economic benefits[188]. - The classification of capital expenditures as sustaining or expansion affects the discounted cash flow (DCF) calculations, as expansion capital expenditures are not deducted in DCF calculations[189]. Market and Risk Exposure - There have been no material changes in market risk exposures since December 31, 2023[214].