Daniel Hansberger

BP Prudhoe Bay Royalty Trust Overvalued By 30% In This Price Environment

Given the low interest rate environment, investors are being forced to seek yield in a number of other riskier investments including royalty trusts, MLPs, and mREITs. However, it appears as though a lot of these investors are buying yield without regard for proper share price valuation. BP Prudhoe Bay Royalty Trust (NYSE:BPT) is an example of a trust where the share price has been seemingly propped up to an overvalued share price. It is currently trading around $90.00/share, which is $28 higher than its discounted NPV. The stock boasts a handsome 12% yield, but as the model will show below, there is only $62/unit left to be paid out in discounted distributions even with "optimistic" assumptions. This makes...

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