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Lower Yields HIghlight the Benefits of Pipelines

David Becker
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www.iforex.com

Pipeline company’s held steady during the recent market selloff as lower yields benefited these toll takers. The top of the heap is Kinder Morgan Energy (NYSE:KMP) which operates as a pipeline transportation and energy storage company in North America. Its Products Pipelines segment delivers gasoline, diesel fuel, jet fuel, and natural gas liquids to various markets throughout the US.

KMP has shown impressive growth in its distributable cash flow over the past four years – the partnership has grown its distributable cash flow at an average rate of 6% over the past four years.

The 52-week range of KMP is $77.13 – $92.99, and the stock hit a fresh 52-week high nearly a year ago in April. Earnings were up 3% in the latest quarter but the 3-year growth rate of earnings was a positive 23%. Sales were up 30% quarter over quarter and the three-year growth rate of sales was up 16%. The company has a very solid profit margin of 24.6%, and the dividend yield is a positive 6.9%.

Recent insider buying makes the stock look attractive. Vice President James P. Wuerth acquired 20,000 shares of this oil & gas pipelines company, paying $79.08 per share for a total amount of $1.58 million.

The technical picture for the stock shows that price action is attempting to form a bottom. Prices are attempting to hold support near the 50-day moving average. The MACD which is still negative is showing a flattening trajectory. The histogram of the MACD index is showing that it is approaching the zero index level. The relative strength index (RSI), which is an oscillator that measures overbought and oversold levels, is printing near 44 which is on the lower end of the neutral range.

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