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Richard Robinson, Ph.D.
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Drawing upon more than a quarter century of experience teaching economics and finance at several prestigious colleges and universities, Richard now shares his vast wealth of knowledge with our readers. Richard is an expert in the field of risk management and reinsurance, and he’s guided more... More
  • Liquified Profits 0 comments
    Jun 14, 2014 2:24 PM | about stocks: TGP, GLNG, GLOG

    In 2008, central banks slashed short-term rates and purchased long bonds in an effort to spur economic growth.

    While many economists believed the central banks had to undertake these risky steps to prevent a financial collapse, most believed these unusual steps would be temporary.

    After all, no economy could long survive an extended period of interest rate manipulation on such a grand scale.

    Five-years later, the extraordinary steps taken have failed to boost growth as promised.

    Instead, central banks have accomplished little more than a mediocre recovery, while heaping massive debt on countries that can scarcely afford it.

    The resulting chaos has made things difficult, especially for income investors.

    The good news is that chaos often brings opportunity…

    Opportunities for Income Investors

    Global demand for natural gas liquids (NGLs) is the next big boom in the energy sector, thanks to the breakthrough technology of fracking.

    The demand for secure supplies of cheap natural gas, and its component liquids like ethane, propane, and butane, has doubled since 2000 and will double again by 2025.

    The U.S. is positioned perfectly to ride this wave, being the world's largest natural gas producer, and thanks to fracking, the global leader for decades to come.

    But, the opportunity for income investors isn't in the production of NGLs, but rather, in the transportation of the liquefied gases.

    In the next several years, the current LNG fleet of 260 vessels will grow to more than 700 vessels to keep pace with expected production.

    And therein lays the opportunity…

    The Top LNG Shipping Stocks to Buy Now

    The box below contains three LNG shipping stocks that are positioned to take advantage of the coming boom.

    Stock

    Yield

    Forward P/E

    P/B

    Profit Margin

    YTD Performance

    Div Payout Ratio

    Teekay LNG (TGP)

    6.3

    14.5

    2.3

    44%

    +4.9%

    109

    Golar (GLNG)

    4.1

    30.6

    2.0

    139%

    +25.6%

    80

    GasLog (GLOG)

    1.8

    16.2

    2.7

    36.2%

    +62.8%

    49

    Teekay LNG has a fleet of 34 LNG carriers under contract from 10 to 25 years in length. TGP will see significant impact to both top and bottom lines once the Panama Canal widening project is complete. While TGP's DPR of 109% is a concern, it comes on the heels of a 54% decline in its payout ratio since 2009 - all while maintaining a five-year dividend growth rate of 3.68%.

    Golar has more than 30 years' experience in LNG shipping with a fleet of 13 vessels - with another 11 scheduled for delivery through 4Q14. The new ships will be state-of-the-art membrane type newbuilds capable of carrying up to 162,000 cubic meters of gas, which will make GLNG one of the strongest contenders in the LNG shipping industry.

    GasLog consists of 18 LNG carriers, including eleven ships on the water and seven ships to be delivered between 2014 and 2016. GLOG is up 62.8% YTD with the boom just getting started. While the dividend is low at 1.8%, they will see an increase in cash flow once their larger fleet of new vessels hit the water. The company projects a revenue increase from $54 million in 2012 to $234 million in 2016.

    Central Bank Failures…

    Nobody expected central banks to depress interest rates this long, but with the snail's pace recovery showing no signs of improvement, investors must find ways to sustain and enhance their income streams without any help from the Fed.

    The energy boom in America may be the best way to invest safely while interest rates remain too low to provide any real help.

    Stocks: TGP, GLNG, GLOG
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