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Kinder Morgan Is a ‘Money Machine’

Kinder Morgan is what I call a money machine,” Cramer said Thursday, “a natural gas pipeline operator that distributes cash practically like it’s an ATM.”

Kinder Morgan makes it money by charging fees on the (mostly) natural gas that it transports, meaning it thrives on volume and is not dependent on the commodity’s price, and then returns a good chunk of that dough to shareholders. Investors who got in on this stock when Cramer first recommended it, on April 2, 2007, are up 64% including distributions. How has the S&P 500 done over the same period, including dividends? It’s down 21%.

Well, on Wednesday, the company’s outperformance continued, as Kinder delivered a strong quarter and increased its distribution by another 4%. Total distributable cash flow climbed 18% in the quarter, and all five of the company’s business segments were up. Especially noteworthy from the report was the 15% jump in the products pipelines business, driven by rising ethanol volumes in California. Cali mandated an increase in the ethanol blend into gasoline, and KMP just so happens to handle about a third of all ethanol produced in the US.

Another couple of things that Cramer is eyeing: Kinder Morgan’s plans to build a natural-gas-liquids pipeline in the Marcellus Shale, a huge reserve of nat gas extending throughout Appalachia. And the company bought a 50% stake in Petrohawk’s natural gas gathering and treating business in the Haynesville Shale in Louisiana and Texas, and formed a joint venture with Copano Energy in the Eagle Ford Shale in south Texas.

Also worth mentioning is that Kinder Morgan, the general partner of Kinder Morgan Energy Partners, is going public after being taken private back in 2007. Cramer wanted to hear more about that deal, as well as the company’s latest quarter, so he asked CEO Richard Kinder to appear on Mad Money. Watch the video for the full interview.

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