At its current share price, Kinder Morgan's (NYSE: KMI) dividend yields more than 5%. That puts the pipeline giant among the top 10 highest-yielding dividend stocks in the S&P 500, where the average yield is below 1.5%.
The pipeline operator can easily afford its high-yielding payout. Here's a look at how much it will distribute in dividends this year.
Kinder Morgan's quarterly dividend rate is $0.2875 per share ($1.15 annualized). That's 2% higher than last year, and made 2024 the company's seventh straight year of increasing its payout. At that rate, Kinder Morgan will pay about $2.6 billion in cash dividends this year, up from about $2.5 billion in 2023.
While that's a lot of money, it's quite affordable for Kinder Morgan. The company is on track to produce $5 billion, or $2.26 per share, of distributable cash flow this year, 8% higher than 2023's total. That puts its dividend payout ratio at around 51%.
That reasonably low payout ratio will allow it to retain about $2.4 billion in excess free cash flow this year -- more than enough to fund its growth capital spending plan of around $2 billion annually. As a result, Kinder Morgan will also have some excess free cash flow that it could use to opportunistically repurchase shares or strengthen its already rock-solid balance sheet. The company is on track to end the year with a leverage ratio of 3.9 -- in the lower half of its 3.5 to 4.5 long-term target range.
With growing cash flows and a conservative financial profile, Kinder Morgan is in an excellent position to continue boosting its high-yielding dividend. Because of that, it's an ideal option for those seeking a sustainable and steadily rising stream of passive income.
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Matt DiLallo has positions in Kinder Morgan. The Motley Fool has positions in and recommends Kinder Morgan. The Motley Fool has a disclosure policy.
How Much Will Kinder Morgan Pay Out in Dividends This Year? was originally published by The Motley Fool