's aggressivepursuit of joint ventures and asset sale opportunities is repositioning thecompany faster than anticipated and could be setting up dividend growth as soonas 2017, a trio of Barclays Capital Inc. analysts said July 18.
"Priorto the [Southern Natural Gas Co.LLC] deal, par for the course for hitting the 5.0x debt/EBITDA wassometime between 2019 and 2020," the analysts wrote. "With the slew ofJV/asset sale announcements, we think the company is sending a memo thatthis threshold could be met sooner rather than later. We think it could bereached this year-end."
Inaddition to selling a 50% stakein the Southern Natural gas system to SouthernCo., recent deals have included the of a 50% interest in itsParkway Pipeline to a ValeroEnergy Corp. affiliate, and its Utopia pipeline with Riverstone InvestmentGroup LLC.
Jointventures involving Kinder Morgan's Trans Mountain expansion project in westernCanada and its capital-intensive CO2 business could also "make a lot ofsense" and help the operator hit its 5.0x target, they added.
"Wethink KMI's latest deals signal that they are being more aggressive than themarket is giving them credit for," the analysts wrote. "If there areJVs of CO2 and [Trans Mountain], we estimate the dividend could potentially goto $0.75 in 2017 and $1.25 in 2018, reflecting coverage of 2.6x and 1.7x,respectively."
Kinder Morgan stock hit a low of $11.20 on January 20, buthas rebounded since then and closed July 18 at $21.76.
Notingmarket demand for higher yielding, growth-oriented stocks, "it's in KMI'sinterest to high grade its segments and raise the dividend as soon as possible,"the Barclays analysts said.