The World Money Show: Five High Yielding Energy Trusts

This is my first trip to InterShow’s the World Money Show in Orlando, Florida. After speaking to a few frequenters of the event, the list of speakers is completely different this year. Last year’s group apparently lost a lot of credibility after the market plunge of 2008. While the attendees at the event are almost entirely retail investors and the majority have AARP cards, the morning’s economic speaker Ron Muhlenkamp, summed it up well for the younger ones among the crowd. He said, “everyone’s first recession as an adult is traumatic.” It takes living through four or five to truly have perspective during troubled times.

That’s why most of the attendees are looking for ideas for putting money to work. There are some great panels, lecture topics and individual speakers, but the two most prominent topics are energy investing and technical analysis. Now, having received my financial education from a distinguished professor who is a product of the University of Chicago’s efficient market school of thought, I simply can’t buy into any of the schools of technical analysis or high frequency trading philosophies. Volatility and market distortions can destroy any methodology, but when fundamentals are not working, market technicians seem to have more pull than ever.

Unlike the chartists, the distributions paid by energy trusts are real. Pengrowth’s (PGH) presence here is clear to everyone wearing a name tag. Here’s a sample of high yielding energy plays that are here at the show:

Ticker	Name	Yield
BTE	Baytex Energy	16.0%
ERF	Enerplus Resources	12.3%
LINE	Linn Energy	15.1%
PGH	Pengrowth Energy	20.3%
PWE	Penn West Energy	20.8%

Are dividends falling? Certainly they have to as energy prices have declined, but they’re holding up well and many of them pay monthly distributions that offer a lot more visibility into future payouts.

The panel assembled to promote TheStreet.com’s (TSCM) investment products offered a few interesting ideas. The most interesting of these to me is Cynosure (CYNO), which was recommended by James Altucher. Altucher’s new book, The Forever Portfolio, seeks investing opportunities in long term demographic trends. Along with skin tightening and other cosmetic procedures, Cynosure develops tattoo removal systems. While I think he may have found something here, the number of tattooed Americans doesn’t seem to be all that astronomical. Yet at 5x trailing EPS and two thirds of tangible book value, it looks very cheap and will find a place on my due diligence to-do list.

Comments

[Conan the B...:]

CYNO... C Y NO.

How much per tatoo?

I'll take my chances with CQP and the possibility that LNG will finally be very profitable...by shipping from here to Europe. Leaving the Europeans less vulnerable to Russian intrigue.

Feb 05 02:11 PM

[tc1:]

Thank you for the article Tom. I myself have been very pleased with the results thus far of investing in Linn Energy, Breitburn Energy (both of which are held by the respected Seth Klarman's Baupost fund), and Whiting's WHX.

Also worth mentioning here are the "cleaner, greener energy" trusts that Tom Konrad and Charles Morand (of altenergystocks.com) have been studying-- such as Boralex Power Income Fund, Great Lakes Hydro Income Fund (both of which i hold "long" positions in), and others, which are into hydro-power and wood (residue) biomass power, etc., paying quarterly or monthly dividends averaging 9% to 19% per year and should see some nice capital gain in shareprice over the coming months/years. Several of these are Canadian, trading on the Toronto Stock Exchange, yet available to investors in the USA through the pink sheets (.PK).

Feb 05 02:30 PM

[Dividend Gr...:]

Tom,

The problem with canadian trusts high yields is summed in one word: 2011 when most yields are going to drop as dividend payments on Canroys are cut.

And I am not even going to mention the rest of the problems..You can check this article out..

www.dividendgrowthinve...

Feb 06 08:21 AM

[Ames Tiedeman:]

PGH, HTE, BTE will probably cut their dividends in the next 30 to 60 days. HTE cannot continue to pay 35%. I expect HTE to cut their dividend 50% o 17%. This will hopefully cause their stock to drop from 7.50 to 6.00 and then you will get nearly 20%. PGH will probably cut 25%. LINE looks safe. Barron's seems to think so anyway.

Feb 06 08:27 AM

[SALTAWAY:]

Be careful with CYNO. I own 2 med spas and cynosure's equipment is very good. BUT the best company and laser equipment leader seems to change about every 2 years. This is high priced fast moving technology. The various manufacturers have all had their day in the sun. None of their stocks would have made you money as a longterm holding. Altucher is smart but in his advice he is often wrong but never in doubt.

SALT

Feb 06 08:41 AM

[Steve Ward:]

According to PWe's latest annual report (2007) the with holding will jump at leat 50 percent from 15 to 23 percent in 2011.
Add in the possibility the US government under Obama may not raise the tac credit accordingly and you have a lousy investment.

Feb 06 10:35 AM

[searcher:]

"..often wrong but never in doubt." Too true for our gurus. Everyone has to make a living; some of 'em are even entertaining.

Only a Romantic should ever consider investing in a medical device company, especially 'cutting edge'. Technological obsolescence guarantees short product life and constant R&D and marketing expenditures.

Feb 06 02:05 PM

[manusceo:]

Most of the Canroys have at least two years of tax carry forwards that will prevent taxes from jumping until at least 2013.

Feb 10 10:25 AM

[snoopyjc:]

PGH yesterday announced its March 16, 2009 cash distribution will be reduced by 41 percent. Oops!
--joe

Feb 21 01:05 AM

[Tom Shohfi:]

The article clearly says that dividends in these oil and gas trusts are falling. Annualizing the $0.08 monthly distribution that PGH is paying out still results in a 12.85% yield (before yesterday's sell-off). That's a still a very strong income stream and that's exactly what most of the attendees at the show were after.


On Feb 21 01:05 AM snoopyjc wrote:

> PGH yesterday announced its March 16, 2009 cash distribution will
> be reduced by 41 percent. Oops!
> --joe

Feb 22 01:19 PM

[Ames Tiedeman:]

With Oil under 40 these trusts are cutting their dividends like mad. PVX, HTE, and PGH have all cut in the past 60 days.

Feb 24 01:28 PM