Top Picks for 2010: Kinder Morgan (KMP)

Calistri continues, "Kinder Morgan Energy Partners is one of the largest owners and operators of energy-product pipelines and storage facilities in the United States.

"Formed in 1992, KMP is structured as a publicly-traded master limited partnership (MLP). MLPs are an important asset class for income investors because they are legally required to distribute most of their taxable income and cash flow to shareholders (known as 'unitholders').

"KMP's extensive pipeline systems carry products such as gasoline and heating oil from the Gulf Coast to the East and West Coasts.

"KMP also owns and operates a network of carbon-dioxide (CO2) pipelines, which are used in a process known as enhanced oil recovery. These pipes carry CO2 to old oil fields where it is injected into the fields to increase productivity. These enhanced recovery techniques become more popular as oil prices rise.

"And KMP is continuing to grow its pipeline revenues through expansion. This past November , the Rockies Express Pipeline became fully operational.

"KMP owns a 50% stake in the 1,679-mile project, which carries natural gas from the Rocky Mountains to the Pennsylvania/Ohio border.

"Although KMP is an energy-related company, its revenues are relatively insensitive to energy prices. The partnership earns fees based on the amount -- not the price -- of gas, oil or refined products it processes and transports.

"Many of its interstate pipelines charge rates that are regulated by the Federal Energy Regulatory Commission. These regulated rates are set to allow Kinder Morgan a steady, reliable return on invested capital.

"Further, the partnership has already locked in guaranteed capacity from a few shippers on its pipes. KMP appears to be on track to not only deliver, but also continue to grow, its distributions.

"And when it comes to distributions, KMP has a stellar track record, having made quarterly payments like clockwork since October 1992.

"KMP also has a very consistent record of dividend growth, boosting distributions nearly every year since its inception. The partnership has increased its distributions at an annualized rate of +7.5% in the last five years alone.

"KMP currently pays a quarterly dividend of $1.05 per unit, equivalent to $4.20 per year for a yield of approximately 7% at current prices. It should be noted that MLPs are best held in taxable accounts as most of their distributions are classified as 'return of capital'."

Steven Halpern's TheStockAdvisors.com offers a free daily overview of the favorite stocks of the nation's leading financial newsletter advisors.