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Michael Connellan

 
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  • Sell This Dividend Blimp Right Now: Requiem For A Philip Morris [View article]
    Joe - PM produces about $400 million in free cash flow PER MONTH. It is a superb business. Your thesis hinges not on PM, but on the assumption of other currencies consistently depreciating against the US dollar. The stock has run up considerably, but the dividend will be at $4.00 within 2-3 years, so for me it's a very long term high quality hold.
    Jun 27 08:16 PM | 7 Likes Like |Link to Comment
  • Seadrill: Now An Attractive 11% Yielder [View article]
    At 11 pct the market is telling us this is a very high risk holding. The key support for the dividend will come from Jon Fredericksen whose family trust owns 24 pct, and counts on the income.
    Apr 2 08:13 PM | 6 Likes Like |Link to Comment
  • 8.54% And Higher Dividend Yields For My 'Personal Pension Plan' [View article]
    Todd - Very interesting. I share your general enthusiasm. However,regarding QRE, thesingle most important number in the financial statements (I've been a CFO, CEO and Chairman so I speak from experience) is Cash Flow from Operations. Cash is what pays vendors, meets payroll, and pays shareholder distributions. In 2011 QRE generated $60 million in cash but paid out $88 million in distributions. Therefore they are dependent on the external capital markets. I would be VERY careful about investing much mobey in a company that is essentially paying distributions by borrowing money and continually selling more stock.
    Sep 18 01:34 PM | 5 Likes Like |Link to Comment
  • Vanguard Natural Resources - Another Sizable Deal For This Monthly Paycheck Provider [View article]
    I'm beginning to be concerned about VNR's debt level. Right now it's a very manageable 3.3X EBITDA but after this acquisition total debt will be approximately $1.5 Billion, 5.0X EBITDA. If rates rise significantly it will create additional pressure. I'd like to see VNR sell stock and reduce debt levels.
    Jan 6 10:36 AM | 3 Likes Like |Link to Comment
  • Why Teekay Is Overvalued And Its Dividend Is Not Safe [View article]
    1. Lots of interesting data. A key change, however, would be the weighted average cost of capital. TGP's cost of equity is about 9.8 percent (div yield plus div growth rate) but their cost of debt is far less. Look at the BS fortotal debt, and IS for interest expense. Overall TGP is about 2/3 debt and 1/3 equity, so TGP's weighted average cost of capital is much less than the 9.8 percent used, which will materially change a number of the calculations.

    2. MLPs are far different structures, and applying corporate analyses to an MLP can at times be misleading.
    Sep 10 12:02 PM | 3 Likes Like |Link to Comment
  • When Royalty Trusts Cease To Be Royal [View article]
    The analysis is shallow and incomplete. It's based on assumed future oilprices of $61-$96 bbl. It fails to account for PBT's $1 Billion cash reserve. It fails to account for the fact that total bbl reserves for BPT have risen a lot each of the last 3 years. At $76 a share, it's a buy!
    Aug 30 03:01 AM | 3 Likes Like |Link to Comment
  • A Quality Income Portfolio For 2012 [View article]
    Good comment. Ultimately, as you know, if you hold a stock long enough, the total return ends up being the original dividend yield + the growth rate of that dividend [often called Gordon's Rule], so your focus on dividend growth is right on!
    Dec 29 03:59 PM | 3 Likes Like |Link to Comment
  • You Need To Pay Higher Taxes So We Don't Become Greece Or Italy [View article]
    I recently added up all the taxes I pay in California, and it came to well over 50% of my paycheck! 35% federal, 10% State, payroll tax, social security tax, etc, etc. And, coming soon, a 3.8% additional Medicare tax, and the possible end to the Bush/Obama 'tax cuts'. Plus overall, 5% of the people are paying as much total income tax as the other 95% combined, and 1/2 don't pay any income taxes at all! Instead of the government helping me succeed, I feel like Big Gov is the biggest single obstacle to success!

    So, I did the logical thing...I simply retired. Why do all that work, take all the risks of running a business and creating jobs, when I get to keep well under 1/2 of what I earn?
    Nov 17 01:56 PM | 3 Likes Like |Link to Comment
  • AT&T And Coca-Cola: More Expensive Than You Think [View article]
    Thanks for the analysis. Studying the dividend - which is a cash payment - relative to EPS is not a meaningful effort despite it's popularity in the press. The single most important number in a company's financial statements is cash flow from operations in the Statement of Cash Flows. From that subtract cap ex, and the result tells you how much cash is available for dividend payments. It's often far different than Net Income.

    Looking at ATT, for example, for the year ended 12/31/2010 T had cash from operations of $34.99 billion, but spent $19.53 billion on required cap ex leaving $15.46 billion available for dividends. They paid out $9.92 billion in dividends, meaning they had $1.55 in cash available for each $1.00 dividend payment - a safe margin.

    Net Income and EPS are accrual numbers, but cash is what meets payroll, pays vendors, and pays dividends.
    Oct 12 06:21 PM | 3 Likes Like |Link to Comment
  • U.S. Energy Policy Is Responsible for Unrest in Egypt [View article]
    Total nonsense, and clearly uninformed.
    Jan 30 09:12 AM | 3 Likes Like |Link to Comment
  • Are High Dividend Stocks a Good Investment? [View article]
    Two points:
    1. the long term IRR on a dividend paying stock is equal to the current yield + the dividend growth rate. This formula should always be included in any long term investment;
    2. comparing the dividend payout ratio using net income is useless and misleading. Use instead cash flow per share. Net income is NOT cash. The single most important number to look at in any company, public or private, is "cash flow from continuing operations".
    Sep 17 02:21 PM | 3 Likes Like |Link to Comment
  • Vanguard Natural Resources: The Best E&P MLP Just Keeps Getting Better [View article]
    I like VNR and own it, but the strategy shift to development and higher cap ex really concerns me since even just recently the management was telling a different story. This is a higher risk approach, and changes the beta.
    Mar 16 05:20 PM | 2 Likes Like |Link to Comment
  • Vanguard Natural Resources - Another Sizable Deal For This Monthly Paycheck Provider [View article]
    Hivoltage - That's a very good point, plus rip2451's comment. I own VNR, and buy more when it dips down at times, and expect to hold it for many years.
    Jan 7 04:28 PM | 2 Likes Like |Link to Comment
  • Vanguard Natural Resources: Why I'm Long This High Yielding Energy Play [View article]
    Good point about the 'tax shield'! In 2012 VNR reported a loss which indicates, I think, that the entire dividend was tax-deferred for the year.
    Sep 13 12:03 PM | 2 Likes Like |Link to Comment
  • Linn Energy: How Low Can It Go? [View article]
    LINE's basic problem seems very straightforward: the company is not earning enough cash to support the dividend. Valuation is of little relevance; cash is the determinant. The company is selling stock and/or borrowing money to pay the dividends. The Statement of Cash Flows clearly tells the tale. 60 pct of the capitalization is debt so they're reaching a limit there. The more the stock drops the harder it is to sell stock to pay the dividend. The end game is clear unless operations improve markedly - LINE will be forced to reduce or eliminate the dividend. Avoid the stock.
    Jul 3 01:39 AM | 2 Likes Like |Link to Comment
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