Northern Tier Energy LP Class A (NTI) NTI will release its first quarter 2013 financials at the close of trading day (13 May 13), and we expect like in previous quarters, the company will quickly announce the ex-dividend date within a week and the pay date the following week. Cashing in on NTI is a great move on this high dividend.
NTI is a sleeper company to many analysts, yet we found some financial strength with an opportunity for the future. NTI is a young company and has created a high dividend, that is aggressive and many investors are staying clear due to the instability at this time. The stock price is $26.07 at open on 13 May 13, and has show an excessive rate of volatility in its stock price over the last year, with a range from $13.00 to $33.24. It has also only provided a dividend the last two quarters (Nov 12 and Feb 13) with the dividend of $1.48, and $1.27 respectively.
One other issue to separate the noise from the facts require us to clarify is that on the Canadian Market, NTI is the symbol for Northcore Technologies Inc. on the Toronto Stock Exchange (TSX). Please do not confuse it with Northern Tier Energy LP Class A (NTI) on the New York Stock Exchange (NYSE). Northcore has some issues it is working through a possible delisting issue on the Toronto Exchange. Not Northern Tier Energy LP Class A.
On 30 Apr 13, NTI established an additional public offering of 12 million common units representing limited partner interests in the Partnership held by Northern Tier Holdings LLC (the selling unit holder) at a price to the public of $26.28 per unit. In addition, the selling unit holder has granted the underwriters a 30-day option to purchase up to an additional 1.8 million common units. We do not expect the current stock price to exceed this price until these are sold and some stability in the market settles.
NTI is shutting down its refinery located in St. Paul Park, Minnesota for approximately 25 days to expand its operational capability. This loss of revenue will hit the second quarter earnings report, but it is planned and the explained loss of income will prevent investors from making a run to sell the stock.
The financials on the company over the last several quarters speak well as it has a 41% return on equity and 25.9% return on investments during 2012. During its year end statement (December 2012), it reported $272 million in cash and equivalents on hand compared to (December 2011) of $123 million on hand. The company paid an excellent dividend and increased its cash on hand to strengthen the books. The company will have to maintain a solid profit margin to afford a high dividend into the future.
We expect the first quarter financials to remain positive and NTI to maintain a high dividend of $1.00 or better. We are looking for some stability of the same dividend several quarters in a row, but another $1.27 with the current stock price of $26.07 reflects a 19.5% (per year) return on investment. Getting just $1.00 would be a 15.3% (per year) return, still a very high dividend return.
NTI is rated as a buy for its excellent dividend return. The cash flow is in great shape and the company is profitable. We anticipate after the positive results from the 1Q 13 financial report, more analysts will be making this recommendation, with caution. We include with caution because the company is young, and with an aggressive dividend the future will remain volatile. We anticipate the price to increase to near $30.00 after the sale of the 12 million units reported above.
NTI is a lesser-known company, and displays diversity in the width of company operations, and displays a great opportunity, with caution. A brief self-description of the company is: As an independent downstream energy company with refining, retail and pipeline operations that serves the PADD II region of the United States. Northern Tier Energy operates an 84,500 barrels per stream day refinery located in St. Paul Park, Minnesota. Northern Tier Energy also operates 166 convenience stores and supports 70 franchised convenience stores, primarily in Minnesota and Wisconsin, under the SuperAmerica trademark, and owns a bakery and commissary under the SuperMom's brand.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: I own stock in NTI and plan to add NTI to my portfolio in the future. I have had many readers misunderstand the statement listed above, "I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours." This refers to if I have a buy or sell in the next 72 hours.