Mad Mail: Is Kinder Morgan’s Dividend Safe?
Cramer started Thursday’s Mad Mail reviewing Petsmart, a stock he passed on during Wednesday’s Lightning Round. He said the company could face pressure from Wal-Mart. And because Cramer’s not a fan of any retail other than Wal-Mart right now, investors should go with WMT instead.
Jim: You have liked Kinder Morgan Energy for its dividend, but I have noticed the projected earnings are about 40% of the projected dividend for '09. What do you think about KMP? Thanks. --Daryl
Cramer says: “KMP is what’s known as a cash flow story. They pay out their cash flow, because it’s really a partnership, and you get a partnership interest. What’s difficult for people to understand is that these master limited partnerships…they don’t play by the same rules. They’re not taxpayers, so to speak. They send it to you. And that’s why we shouldn’t be as concerned about typically what I like to see, which is a lot of earnings covering a dividend. This is a lot cash flow covering a dividend. And they’re going to do a good job for that.”
Dear Cramer: The new assessment to refill the FDIC coffers will kill any profit that small banks make. My wife is a community banker and the FDIC wants the equivalent of two years profit in a lump sum assessment. And [FDIC Chairwoman Sheila] Bair says this is the bank's burden to bear…really? Even while we, the taxpayers, are spending trillions to keep the big bank competition on life support? Is there any sanity left in Washington? --Jim
Cramer says: “I regard the FDIC like Social Security. Do I need the Social Security? Do I need to pay into it? Hopefully at that age I will have enough, I won’t need it. But the FDIC, it’s for everybody. And when you went into banking you knew that. And you knew that they could always raise the fees. Sheila Bair…I think she’s fair as fair can be. I wish she were running Treasury. I think she’s doing the right thing. It’s a point that everybody has to bear in the banking business. And it’s always been the way it is. Why should it change now? It’s probably one of the most successful programs in the history of the federal government.”
Dear Jim: In the U.K. the banks are lending on variable mortgage at 100 basis points (1%) over the Bank of England interest rate. A homeowner in the U.K. has seen his variable mortgage rate drop from 6% to 1.5%. Why is this not happening in the US where banks are lending at FED funds plus 500 basis points? The Obama administration should allow/force the US banks to lend at Fed funds plus 100 basis points like in the U.K.. This program will not cost the taxpayer any money and will help all homeowners. Do you agree? --David
Cramer says: “I think that it’s not a realistic proposal. I think that the banks will lose too much money. There has to be some vig, so to speak, for the banks. What I have favored over and over again in this country is that the government should be in the business of issuing mortgages for the next 18 months, giving everybody who wants one, or [needs to] refinance, not just the dead beats, 4%. That will solve the problem. It’s great what the U.K. banks are doing. A lot of them are going to end up being owned by the government, though. I don’t want that to happen here [in the U.S.]”
Cramer's charitable trust owns Wal-Mart.
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