This High-Yielding Energy Investment's Dividend Is Likely Safe in 2015 and Might Even Grow 10%

Oil prices have crashed for seven straight weeks to their lowest price in six years, and the result has been catastrophic for the likes of high-yielding oil producing MLPs like Breitburn Energy Partners (NASDAQ: BBEP) , Linn Energy (NASDAQ: LINE), and its non-MLP equivalent LinnCo (NASDAQ: LNCO). Most investors know Kinder Morgan Inc (NYSE: KMI ) , as America's largest natural gas pipeline operator and indeed this high-yielding energy blue chip derived 82% of its 2014 EBITDA, or earnings before interest, taxes, depreciation, and amortization, from long-term, fixed-fee contracts associated with pipelines.

The safety of Kinder Morgan's dividend is courtesy of four factors. The first is its long-term, fixed-fee contracts on its pipeline business, which provides stable and guaranteed distributable cash flow, or DCF, from which to pay the dividend. Last year 82% of cash flows were derived from this dependable source. Second is Kinder's aggressive use of hedging in regards to its oil production, which currently stands at 22.3 million barrels of production, representing 18 months worth of the company's net production. Third is the enormous tax benefits derived from its recent merger with its MLPs, which founder and CEO Richard Kinder claims will be worth $55 billion, or nearly $4 billion per year, over the next 14 years

Source: Motley Fool

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