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KMI cuts dividend by 75% slapping their investors face

beating

 
So the news is out. KMI cut the dividend by 75% after the market today. After hours, the stock dropped 6.5% and we may expect more investors abandoning the ship. If you feel like your investment fleet took a beating, don’t worry, you are not alone.

The dividend cut is a blow to all investors who were diligently building their portfolios and such behavior from the management who knowingly brought the company into this situation deserve a punishment. And there will be many who invest in their taxable accounts and they will tax harvest and sell.

But if you are like me, I need a different strategy.

 

 · What are my options and views?

 

  • I have all my stock investments in ROTH IRA account. Tax harvesting doesn’t make sense for me.
  •  

  • Selling now would mean I will be taking almost 60% loss. My cost basis is $35.68 per shares. At current prices I am not willing to take that loss.
  •  

  • Because I own shares in my ROTH IRA account I have more than 20 years time to wait for this stock to recover. In the meantime, I will be reinvesting dividends and even buying more shares to further lower my cost basis.
  •  

  • In other words, I will no longer look at this stock as a dividend growth stock, but a growth stock. At least for the time being.

 

KMI is a pipeline company owning large infrastructure, it will not go under. I expect this stock to recover when the energy stocks recover too. If the management improves and gets better in managing balance between their debt and other obligations such as dividends and investments the price will go up and the dividends may also go up. If so, I may keep the stock, if not, and my cost basis will be low enough to sell, I will sell.

 
But for now, it is all about a damage management. Lower the cost and wait for recovery. I believe, in the next 20 years it will happen.
 





3 responses to “KMI cuts dividend by 75% slapping their investors face”

  1. Dennis says:

    Hello Suckers…

    You’ll probably hear a lot of “I told you so” but the truth is a lot of people were caught off guard by that cut in the dividend. I personally don’t own KMI but I own several other companies that also cut their dividend. And it sucks! I think it was such a surprise that a rock solid midstream company like KMI did it. Events just like this are a reminder that buying a companies solely based on their dividend is not enough. Investors need to recognize a company’s balance sheet and the amount of debt the company is obligated to service. Take care and I feel your pain. You bought KMI for the dividend and it’s still paying a dividend (although reduced). The oil industry is not going out of business any time soon.

    Respectfully,

    Dennis McCain

    • Martin says:

      Dennis,

      Yes I have heard a few of those. I wasn’t watching KMI much and also some other stocks as I invest and forget which I think dividend stocks are in that category where you can afford it. Well, I look at these stocks from a long term, 20 year, perspective and from that perspective I think KMI will thrive. So I am not panicking and as I mentioned, I will be adding more shares.

      Thanks for stopping by.

  2. Bud Fox says:

    Warned you back in August, about the market heading south and told you sell and buy back lower. This long up coming bear is going to reduce dividends across the board. The Dow is going to go down to 6000 to 7500 soon. Dividends will be suspended to keep CEOs salaries afloat at the expense of shareholders. Could I be wrong….NO!!!!
    Good luck holding your shares as the market drops too low to recover for years to come. Once China and Russia declare their fiat currencies backed by gold the Dow will be an antiquated pathetic dung heap based on a worthless dollar. Hey, but then again, do not listen to me. I was wrong back in August….may be I was right?

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