The valuation of the leading US pipeline operator has soared over the past twelve months

In terms of operations, however, not much has changed, either in terms of the volumes passing through its pipes or in terms of contracted storage capacity. On the financial front, pre-tax profit rose by 6%, distributable cash to shareholders by 4%, and the dividend by 2% between 2024 and 2023.

These metrics are all partially adjustable at management's discretion. In terms of cash flow, i.e. through a cruder, more prosaic prism, things are less satisfactory: operating cash flow rises from $6.5 to $5.6 billion, while capital expenditure rises from $2.3 to $2.6 billion; as a result, free cash flow falls by a quarter and by at least $1 billion.

The $2.5 billion dividend remains adequately covered, but far less comfortably than last year. Net debt, meanwhile, remains perfectly unchanged. All other things being equal, at almost $32 billion, it still represents a whopping eleven years of free cash flow.

However, the market has reserved a great year 2024 for Kinder Morgan, since its market capitalization has doubled in the space of twelve months. This surge is undoubtedly due to unprecedented optimism surrounding the natural gas sector, notably for its role in the electrification of data centers - the neuralgic brains of artificial intelligence - and in relation to the opening of new LNG terminals.

The market is now assigning a real growth scenario to Kinder Morgan's valuation. At the current price, the dividend yield stands at 3.74%, while ten-year US Treasury bonds pay 4.64% and AAA-rated bonds 5.4% on average.

Pipelines may be considered safe assets, but the risk premium here has entirely disappeared; it's even strangely negative, which raises questions about investors' speculative appetites. 

MarketScreener confesses to being uncomfortable with these valuation levels, even with a dividend still expected to grow by 2% over 2025. If we had to be comfortable, we would have been more so at the beginning of last year, albeit with some reservations. 

Despite the highly strategic nature of its assets, the returns on investment obtained by Kinder Morgan throughout its external growth strategy have proved rather disappointing. To its credit, the group has nonetheless become a key player, since 40% of US natural gas production transits through its pipelines and terminals, while at least 15% is housed in its various storage terminals.