The board of Kinder Morgan, Inc. (NYSE:KMI) has announced that it will pay a dividend on the 15th of May, with investors receiving $0.2925 per share. This means the dividend yield will be fairly typical at 4.3%.

Our free stock report includes 3 warning signs investors should be aware of before investing in Kinder Morgan. Read for free now.

Kinder Morgan's Projected Earnings Seem Likely To Cover Future Distributions

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Before making this announcement, the company's dividend was higher than its profits, and made up 88% of cash flows. This indicates that the company could be more focused on returning cash to shareholders than reinvesting to grow the business.

Looking forward, earnings per share is forecast to rise by 33.8% over the next year. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 73% which brings it into quite a comfortable range.

Check out our latest analysis for Kinder Morgan

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of $1.72 in 2015 to the most recent total annual payment of $1.17. This works out to be a decline of approximately 3.8% per year over that time. A company that decreases its dividend over time generally isn't what we are looking for.

Kinder Morgan Might Find It Hard To Grow Its Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that Kinder Morgan has been growing its earnings per share at 15% a year over the past five years. However, the payout ratio is very high, not leaving much room for growth of the dividend in the future.

Kinder Morgan's Dividend Doesn't Look Sustainable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While we generally think the level of distributions are a bit high, we wouldn't rule it out as becoming a good dividend payer in the future as its earnings are growing healthily. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 3 warning signs for Kinder Morgan (of which 1 is significant!) you should know about. Is Kinder Morgan not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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