Kinder Morgan, Inc. (NYSE: KMI) may not be as well know as other energy giants like ExxonMobile, Chevron or ConocoPhillips, but KMI has set up a bold strategy to move itself into the $100 billion market cap club and grow rapidly from there. Investors who get in now have a very good chance of making 30% by the end of next year, and 15% to 20% annual returns through at least 2020. Rich Kinder, Chairman and CEO has put it in writing!

Currently, Kinder Morgan is a group of companies, with master limited partnership Kinder Morgan Energy Partners (NYSE: KMP) as the $44 billion workhorse of the group, El Paso Pipeline Partners (NYSE: EPB) is a natural gas pipeline partnership that Kinder acquired control of several years ago. And Kinder Morgan, Inc. acts primarily as the general partner and manager of the two partnerships. The Kinder Morgan companies operate in what is referred to as the midstream sector of the energy business. The companies provide processing, transport via pipeline, rail, barge and truck, and storage of crude oil, natural gas and refined products. 

Kinder Morgan Energy Partners was one of the first midstream MLPs and the company's own success has resulted in a growth and financing plan that costs too much in relation to the cash flow generated. Younger MLPs are one of the best capital raising structures available and these companies typically pay attractive and growing distributions to investors. However, Kinder Morgan has outgrown the benefits of the MLP structure as it currently functions for KMP and EPB.

On August 11, Kinder Morgan announced that is was going to roll up KMP, EPB and Kinder Morgan Management (NYSE: KMR) into a single corporate entity, Kinder Morgan, Inc. Investors in the other three companies will receive KMI shares and cash. When the mergers are complete, KMI will go from its current $41 billion market cap to well over $100 billion, and become the largest energy infrastructure company in North America. The roll up will reduce the overall Kinder cost of capital and allow the company to get more than its share of the $10's of billions of energy infrastructure projects that will be required over the next decade.

Published Growth Projects for Locked In Investment Gains

The energy infrastructure businesses of Kinder Morgan primarily generate fee based revenues. As a result, the company can pick projects to develop and have an accurate estimate of the revenue and cash flow the profits will produce. Over its 18 year history, Kinder Morgan Energy Partners produced 18 years of cash flow growth and hit is distribution projections for 14 out of the last 14 years. Rich Kinder is taking at same MLP model to Kinder Morgan, Inc., setting up a growth and cash flow machine that allows the management team to accurately forecast future dividend growth.

With the roll up announcement, Kinder Morgan included a forecast that the KMI dividend will total $2.00 per share in 2015, compared to the current annualized rate of $1.72. That works out to a 16% increase. Also, Kinder announced that after 2015 dividends are expected to grow by 10% per year through at least 2020.

High Dividend Growth Equals Better Total Returns

Calculating a 2015 return takes just a couple of assumptions and some simple math. First, expect KMI to follow its past history by increasing the dividend every quarter. This means the $2.00 will be paid in increasing steps. With the quarterly dividend at $0.43 now, next year's dividends will be close to $0.47, $0.49, $0.51 and $0.53 for Q1 through Q4. The next assumption is to forecast the yield for KMI at the end of 2015. The large energy companies like Chevron and ConnocoPhillips currently yield around 3.5%. Using a higher 4% end of year yield and next year's final dividend rate, the KMI share price should be at or near $53. 

KMI is currently trading at about $40. Using the $53 target price, one more $0.45 dividend this year and $2.00 in dividends in 2015, you will earn $15.45 on your $40 per share investment, or 38% total return. Kinder Morgan expects to complete the roll up of its controlled companies in the 2014 fourth quarter. The KMI share price is down since the announcement, but it should start to increase with the next dividend announcement later in October.