Kinder Morgan (KMI) Dividend Cut to $0.01/Share Forthcoming - Jefferies

Shares of Kinder Morgan (NYSE: KMI) have recently come under extreme pressure as investors have grown concerned about KMI's leverage, the risk of a credit downgrade to HY, & the prospect external capital may not be available to fund capex. Jefferies analyst, Christopher Sighinolfi, believes a dividend cut to 1¢/qtr through '17 is the most prudent action to fund capex, preserve IG, & inoculate KMI from capital market risks.

A reduction in KMI's dividend to 1¢/qtr through 2017, reinstated to $2 in 2018 with 5% annual growth through 2020, will enable KMI to fully fund its capex without any equity issuance, de-lever its BS & retain IG credit ratings, and re-position the company's financial & competitive posture for years to come.

KMI has been characterized by aggressiveness & bravado and mgmt has prided itself on achieving annual dividend commitments since 2000 ('promises made, promises kept'). There are no guarantees it will reduce its dividend at all or to the extent necessary to support capex. On Friday, mgmt offered 2016 financial expectations & hinted that a dividend cut may be considered and the analyst believes a decision could come this week.

No change to Hold rating but the price target was chopped by more than half from $33 to $15.

For an analyst ratings summary and ratings history on Kinder Morgan click here. For more ratings news on Kinder Morgan click here.

Shares of Kinder Morgan closed at $16.82 yesterday.

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