Up 41% in 2024, Does This High-Yield Dividend Stock Have More Room to Run?

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]