Tuesday, December 8, 2015

Sold KMI, bought EPD

On Friday I swapped out Kinder Morgan Inc (NYSE: KMI) for Enterprise Products Partners (NYSE: EPD). As I mentioned on Seeking Alpha, I believe that Enterprise is much better capable of maintaining its dividend in this difficult time. The reason is twofold: 1) Higher coverage ratio and 2) A much more manageable maturities schedule.

Kinder Morgan's dividend is likely going to be cut in half or just eliminated altogether, because the company has not only very significant capital needs but also a swath of maturities coming due, each year, through 2020. Enterprise has far fewer maturity commitments coming due, and Enterprise has substantial cash flow in excess of dividends by which to pay debt down or fund projects.

In short, I have evacuated to higher ground. I took a big dividend haircut on this, but at least I live to fight another day.

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