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Reflecting its concentration on natural gas, buy-recommended Hugoton Royalty Trust (HGT) has the eventual appreciation potential of the world’s most attractively priced energy for fueling global growth. In contrast to other commodities that have rising price, natural gas has a price that has barely moved from $5.34 a million BTU for delivery in North America over the next six years. The declining 40-week average is $5.45.

Actually, HGT's stock price is in a steadily rising trend above its 200-day average, helped perhaps by its modest oil concentration at 11% of Present Value and about 21% of cash flow (NTM Ebitda) . Yet, income investors don’t need much stock price appreciation because the trust offers a cash distribution estimated at 6.0% for the next twelve months. Relevant tables can be viewed here.

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Originally published on March 11, 2011

Source: Contrarian Commodity Income in Hugoton Royalty Trust