We have upgraded Kinder Morgan (KMP), the largest independent owner and operator of petroleum product pipelines in the U.S., to Buy from Hold on valuation grounds.

We believe that the recent broad MLP-group sell-off in general and KMP weakness in particular is overdone and provides for excellent buying opportunities. Distributions are safe as evident from KMP’s just-announced distribution increase.

For the third quarter of 2008, the partnership announced a 16% increase in distribution to the annualized run rate of $4.08 per unit. We believe that MLP valuations are at extremely attractive levels.

Given its diversified business mix and comfortable distribution coverage ratio, we believe the partnership can easily maintain a distribution growth rate of around 8% annually over the next few years. With over $3 billion of organic projects beginning to come online over the next few years, we see favorable long-term growth profile for KMP.

Read the full analyst report on KMP

“KMP” Free Stock Analysis: Buy? Sell? Hold?
Zacks Investment Research

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