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KMP Kinder Morgan Energy Partners, weird stock offering juicy dividends. August 21, 2006

Posted by deminvest in investment, KMP, Single stocks, stocks.

KMP Kinder Morgan Energy Partners is in many ways a strange company:
1)    It pays a rich 7.20% dividend which it should not be able to afford, because it amounts to twice Company’s earnings
2)    It’s main shareholder is a smaller company: (KMI) Kinder Morgan, Inc. whose CEO is the same mister Kinder of KPM

KMP’s business is natural gas, refined products and crude oil pipeline transportation.

The company is not very cheap:
Trailing P/E:27.83
Forward P/E:19.65

It shows an OK growth rate: Qtrly Revenue Growth (yoy):3.30% Qtrly Earnings Growth (yoy):11.40%.

Maybe the company will be able to continue growing while continuing to pay such hefty dividends.

I don’t know yet whether I’ll go for it and buy my August $1000 worth of stock of KMP or I will after all decide to get GARMIN, or will look for a new prospect.

This August is a confusing month for stock picking by proletarians!


1. len - August 22, 2006

must u go buy a stock even if ur not so convinced of the potential of the company? just because u fell into the routine of acquiring stock every month…

2. deminvest - August 30, 2006

It is very important to have an investment strategy. It is the most important thing for “proletarian investors” like us.

Actually stock picking is mainly a game that we do on this blog. We can only try to pick the best stock. We don’t get the information that professionals can have. We can’t be little Warren Buffets because we don’t have the skill and the team he has. So we need an investment strategy. And the best investment strategy is exactly that:
Invest the same amount every month on stocks.
Doing so allows us to buy more stocks when the market goes down and they are cheaper and obtain good gains in the long run, no matter how markets behave.
I will try to explain with an example:
Let’s suppose we are spending $1000 buying stock A at $25 each. We will get 40 stocks A.
After a month stock goes down to $20. We buy another $1000 of it and we get 50 of them.
One month later our stock tumbles and it goes to $10. With our monthly $1000 we buy 100 stocks A.
One month later the stock goes back to $20. At that time we have 190 stocks A worth at the time $3800 and we have spent a total of $3000.
Well the nice thing is that even though our stock has gone down 20% (from $25 to $20) we have gained $800. This is possible because we have bought most of our stocks (100) around the minimum. And we have done it automatically, because with the same amount of money you buy more stocks if you buy around the minimum

This is why it is very important to buy the same amount every month, no matter what the market does.

And well I have found the next stock to invest on and will write a blog about it now!

3. len - August 30, 2006

thanks for taking time to explain your strategy. am also thinking of buying a share of stock in a new company and am part of the marketing group of that company. the initial share is 1200 in eurodollars. it is not much but i guess, it will have a good pay off later.

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