kinder morgan (KMI -1.50%) has given investors a glimpse of what to expect next year by releasing preliminary financial forecasts for 2023. One of his highlights in that report was the news that the company plans to increase its dividend for the sixth year in a row. That would make the company’s 6.3% payout even higher, making it even more attractive to income-seeking investors.
Here’s an overview of natural gas: pipeline The giant looks ahead to 2023.
Digging into Kinder Morgan’s Game Plan for 2023
Management expects Kinder Morgan to generate adjusted $7.7 billion. EBITDA next year. That would be about 3% above his $7.5 billion forecast for 2022. Growth drivers include volume increases in refined products and collection and processing operations, higher rates due to re-contracting of Jones Act tankers, and the initiation of expansion projects.
However, the company expects distributable cash flow to decline by about 2% to $4.8 billion, or $2.13 per share. This is entirely due to the impact of rising interest rates on the company’s floating rate debt. Without that impact, distributable cash flow would have been projected to increase by 5%.
Despite the reduced cash flow, Kinder Morgan will generate enough cash to increase capital expenditures and increase its dividend with more than enough margin. The company plans to invest his $2.1 billion in expansion projects in 2023. Around 80% of the investment will go into low-carbon projects, including: Natural gas Pipeline expansions, renewable natural gas production facilities, renewable diesel projects.
Meanwhile, management said it plans to increase the annual dividend by 3% to $1.13 per share in 2023. This payout rate means that in 2022 he will generate over $400 million in excess free cash after the company covers investment spending. As a result, the company expects the debt-to-his EBITDA ratio to be around 4.0 by the end of 2023, well below its long-term leverage target of 4.5. This gives us sufficient capacity to opportunistically buy back our shares or make additional investments.
Rates turn from tailwind to headwind in 2023
This year will be a tale of two story lines. Meanwhile, “we expect 2023 to be another very good year for Kinder Morgan,” CEO Steve Keane said in a guidance press release. and continued strong growth in demand for expanded natural gas transportation, storage, collection and processing; continuing demand for refined product midstream services; and investments in our energy transition ventures.” I’m looking at several factors.
However, Mr Keene said, “These results will be offset by the higher interest rate environment expected in 2023.” This is due to the company’s corporate strategy of This strategy has paid off big over the past decade when interest rates were low. Specifically, President Kimberly Dang said in a press release that Kinder Morgan has saved “approximately $1.2 billion over the past decade.” This far exceeds the expected impact of rising interest rates on cash flow next year.
Meanwhile, the company also has $3.2 billion in debt maturities that it has to deal with over the next year. Cash on hand, projected excess cash flow, and the flexibility to manage them thanks to his $4 billion undrawn credit line. This gives them time to wait for market conditions to improve before refinancing to new long-term debt.
a solid source of passive income
Things are going to be mixed for Kinder Morgan next year as earnings rise, but cash flow declines as interest rates move from tailwind to headwind. However, the middle-class giant still hopes to generate enough cash to invest in expanding its business while increasing its high-yielding dividend. On the other hand, Kinder Morgan has conservative financial metrics, so high payouts should remain strong. As such, it remains an excellent option for those seeking a low-risk, passive source of income.