When my shares of KMP were basically going to be taken from me last year, I chose to sell at the high and walk away. Believe me when I say this…… I was pissed off! I was angry that I made a choice to invest in an MLP, and it was going to be dissolved. I was angry that no matter what I said or did, I had to pay some type of taxes and file endless tax forms for my multuple accounts that held the shares on something I never planned on selling.
However, almost a year has passed and that is now all behind me- or is it? On the surface, it is. However, lurking below the surface and in the back of my mind, I feel like I was just only lucky to have not just let the shares convert to KMI.
I can remember complaining incessantly about having to do the tax forms, but I actually had a nice gain to work with. What a difference a year makes! I can remember collecting over 7% on the KMP shares and, I was ever so happy to do so. The main reason, I sold off was because it ran up only for the reason that the shares of KMP and the other entities were going to be absorbed by KMI. I just could not get my head around that, so I decided to not convert KMP and wait until KMI settled down and returned to earth.
It seemed that the KMI stock just kept chugging along even as the price of oil started to collapse. All the while, I had my eye on KMI, but just could not pull the trigger. I definitely did not feel comfortable even as the stock started to move down, and the yield started to creep up. Over the past few months, I have been anticipating oil in the 20’s, and I was very hesitant to get into NOV, BBL or RDS, let alone, KMI. Well, today felt like Feb. 2009 all over again.I can remember that fateful day all too well- GE cut its dividend by 68%. This afternoon, all those feelings came rushing back even though I do not currently hold any shares of KMI. Believe me, I know how a cut like KMI made today makes a person feel, and even though I have no vested interest in the company, I very well could have had myself neck deep!
I have no real explanation as to why I am not in this quagmire except maybe it was just fate. All I do know is that no matter how positive a CEO or analyst is that a dividend is absolutely safe, there is no guarantee that a company will not chop it to bits in order to save the company- Period!
I do know how the investors or going to feel, and tomorrow might be a bit more than most have ever been exposed to. However, I ask if it is better to drive the company into the ground or attempt to save it by reducing the dividend to a more sustainable level. It is really a matter of self preservation. The company must do whatever it has to do to stay solvent because not only is the dividend at stake, but the entire share value is potentially on the block too.
I cannot say how the stock is going to react to such news, and I do know that it is going to take quite a long time for the dividend to return to its former glory-if ever. I know that I have learned not to catch a falling knife- I mentioned that back when ARCP had its little problems. I personally have no interest in jumping on KMI right now. If oil drops to the 20’s, KMI could drop to low single digits or worse. With the news of a continued glut in oil, and the possibility of the powers that be trying to drive the small players and those who have tons of debt out of the oil patch, lower oil could be on the horizon. Hopefully, KMI cut deep enough and did not anticipate oil coming out of the doldrums anytime soon. Time will surely tell.
Good luck to all.
Robert the DividendDreamer
AKA — Seeking Dividends@Seeking Alpha
Follow me on Twitter– Seeking Dividends@DividendDreamer
AKA — DividendDreamer