Smarty_Pants

Smarty_Pants
Send Message
View as an RSS Feed
  • GasLog, Golar LNG plunge amid Teekay dividend cuts  [View news story]
    "What is GLOP/GLNG's orderbook look like? Any major commitments coming up over the next couple years? Stock = currency for these MLPs, once their buying power dwindled the divvy cut was unavoidable." - kennethjw14

    I can't speak to GLNG, but GLOP's parent company has 12 ships in the pipeline available for drop down. GLOP's presentations indicate that they will only add ships to the LP if their cost of capital is "appropriate".

    Given the severe drop in share price, I would hope that GLOP's acquisitions would temporarily stop until share prices rebound. Their current fleet average contract lasts 8.3 years. GLOP, and by extension GLOG, would be able to maintain current distributions indefinitely until share prices recover.

    Meanwhile, for Q3 2015 GLOP had $19.2 million of profit on $51.4 million in revenues, with $15.7 million in distributions. In addition, they had another $11.2 million in depreciation (revenue not counted toward profits).

    By my reckoning, that leaves them with $14.7 million of cash 'left over' in Q3 which could be split between paying down debt and/or buying shares (with a book value of $17.85 at prices below $14.00).

    Their total debt stands at $771.3 million. Their float is about 32 million shares. If they bought 1 million shares each year (only at prices below $14) they could pay down debt with ~$45 million annually, while maintaining the current distribution.

    When the share price rebounds sufficiently (say to $25-ish) they could then elect to resume adding ships to the LP by re-issuing the shares they bought at $14 or less.
    Dec 17, 2015. 04:53 PM | 2 Likes Like |Link to Comment
  • GasLog, Golar LNG plunge amid Teekay dividend cuts  [View news story]
    GLOP, the LP which generates the income for GLOG, has a distribution coverage ratio of 1.37x for Q3 2015.

    http://bit.ly/1IbhvH0

    The risk of a distribution cut for GLOP or GLOG can't be very high with that kind of free cash flow based on long term contracts which aren't tied to the price of the cargo being transported. Looks like a "blood in the streets" DRIP buying opportunity when the next distribution is paid out.

    It appears that the baby is being tossed out with the bath water, IMHO.
    Dec 17, 2015. 11:15 AM | 6 Likes Like |Link to Comment
  • MLPs: What's In Store For The Sector After The 43% Drop YTD?  [View article]
    Another potential approach might be to keep distributions fixed at current levels and use any remaining free cash flow to buy back their own shares at the discount levels now available.

    It would appear that such an approach would serve to slowly increase the free cash per share over time, without the need to leverage up on debt. If/when share prices do recover toward "more historic" levels those shares can then be re-issued (at a profit) to fund further growth with less debt being necessary.
    Dec 17, 2015. 08:10 AM | 5 Likes Like |Link to Comment
  • Retired Dividend Growth Investors: I Have A Problem.  [View instapost]
    Bob, well wishes recovering from your surgery. That's the more important issue currently. I hope you're up and about again at 100% in short order.

    An alternative place to park your KMI investment to consider might be ARLP or AHGP. Both have suffered huge drops and yield over 16% at currently prices. The Limited Partnership (ARLP) has a solid balance sheet with <0.7 debt/equity and plenty of cash flow to continue paying their distributions.

    The downside is they are both MLPs, so you have a potential UBTI issue in a tax deferred account, and it is possible that price drops will continue as everyone piles on the energy and coal industries.

    Still, it appears that they will be able to continue paying distributions for a long time to come, and at some point the share price may turn back up toward higher ground.

    These shares may not be what you're looking for, but they do provide an alternative to KMI which will allow you to collect the same, or higher, income. Perhaps you can buy only enough to produce your KMI income level, and keep the remainder in cash or buy another DG stock.

    Lots of possibilities to evaluate. The question is, how much do you really NEED that KMI income? Can you get by with less? The MLP space is really beaten up and you can find other solid high yielders there, but they may not have easy to find credit ratings. You might have to evaluate that aspect of each business yourself.
    Dec 6, 2015. 05:24 PM | Likes Like |Link to Comment
  • Investing For Retirement: A Different Strategy For The $7 Million Portfolio  [View article]
    "it would be very different if the larger bills are triggered by a one-time event, such as an IRA conversion." - Ted Fischer

    Aha! There's the turn I missed. One-off income boosts due to IRA conversions that penalize you for life in the cost of medical care. Got it. Thanks for pointing that out. Seems our government supplied medical care has hidden tax on the back end as well.

    I'm glad I converted most of my IRA to Roth already, and have another 10 years to convert what little remains in my 401k. My plan would be to have no assets in a regular IRA at age 64, only in a Roth. That way any medicare 'hit' would be due to having a recurring annual income which exceeds the threshold, at a percentage cost much lower than what I'm paying now.
    Dec 3, 2015. 05:36 AM | Likes Like |Link to Comment
  • Investing For Retirement: A Different Strategy For The $7 Million Portfolio  [View article]
    "Just be ready when you are on social security with your 200k income.
    At 170k your medicare and prescription coverage goes up to close to $90 per month. Next steps 214k and 320k and 428k+ (~ 400 per month)." - Johan2003

    No offence intended, but I don't get it...

    Think I'll be doing a happy dance on the day when my medical insurance only costs me

    ( $90 * 12) / $170,000 = 0.6% of my income, or even
    ($400 * 12) / $428,000 = 1.1% of my income.

    My current medical insurance costs over 7.5% of my gross salary, plus I pay another 1.45% in Medicare taxes so that I can qualify for that Medicare bargain when I turn 65.

    AND, if you've got a $428,000 passive income, why are you concerned over a $4,800 annual cost of medical insurance? You've got enough income and assets to fly overseas and pay full cost for nearly any medical procedures needed. What's the big deal? It's not like that $4,800 is going to put a serious dent in your lifestyle with that kind of income.
    Dec 2, 2015. 06:21 PM | 1 Like Like |Link to Comment
  • Have Fun Investing, But Don't Just Roll The Dice  [View article]
    Great article Rose!

    It seems so simple and flows so smoothly, yet covers very important points to understand when planning and building a solid DG portfolio. I am sure the work you put in to write the article was significantly greater than it might seem. Thank you for taking the time to share what you have learned.

    I might add that your article addresses the core building blocks of a DG approach. It is possible to add other positions once a sufficiently large core is assembled (the "meat and potatoes"). Those other positions, in smaller sizes, would be the "spice" one might add to the meal. That's where one might add positions in REITs, MLPs, BDCs, or faster growing / smaller companies, etc. to boost current and/or future income a smidge.

    Thanks again for such a content rich article.
    Dec 1, 2015. 10:21 AM | 4 Likes Like |Link to Comment
  • New-Look Periodic Table Of Dividend Champions: Credit Rating Edition  [View article]
    Thanks for pulling all this information together into an easy to read format DVK. You Rock!

    "TROW has no debt and therefore no credit rating." - RoseNose

    Adding a separate row for NR companies that have no debt would be a nice extra touch. I suppose those kind of companies might be worth owning if everything else looks good.
    Nov 30, 2015. 03:54 PM | 8 Likes Like |Link to Comment
  • My 4% Dividend Yield Portfolio: A Postmortem After One Year  [View article]
    "Since ... producers are hurt by lower prices, its possible that the producers will reduce volume." - PendragonY

    The producers have bills to pay and must also pay the cost of building out their infrastructure, including payments on any remaining debt used for construction. If they reduce production they have less revenue (and possibly larger losses).

    Look at Chevron's Dec 2014 startup of their Jack/St. Malo deepwater platform in the Gulf. It cost CVX $8 Billion to build the rig and start pumping.

    "This week of extreme oil price volatility might not seem like an auspicious time for Chevron to open the spigots on its $8 billion Jack/St. Malo production platform in the deepwater Gulf of Mexico. But when something this big and expensive is ready to start paying back its construction costs, there’s no reason to wait." - Forbes article - Dec 2014

    http://onforb.es/1O5AO1d

    More recently ...

    [Moody's] "forecasts that giants including ... Chevron Corp. ... will record reductions in cash flow of as much as 20 percent this year with only a modest recovery in 2016. The shrinking base of cash flow has led companies to cut back on expenses and pare drilling by an average of about 10 percent thus far ... Longer-term projects that are already underway are likely to be completed, though integrated companies are unlikely to commit to new ones until prices rebound, the firm said." - Sept 2015

    http://bit.ly/1OwLJ6q


    My reading on this is that current production will continue and savings will primarily come from exploration (drilling) cuts, delaying new construction projects, and workforce reductions. The KNOP Q3 lease rates reflect that at 99.6% despite the low prices for oil.

    I understand others may interpret things differently so we might have to agree to disagree, but those differences of opinion are what make a market.

    Thanks for offering your read on things.
    Nov 28, 2015. 11:04 AM | Likes Like |Link to Comment
  • Investing For Retirement: A Different Strategy For The $7 Million Portfolio  [View article]
    "The future value multiplier Bruce is using is a fairly quick 1.05^19 unless I miss my guess." - ColoradoWealthManageme...

    1.05^20 = 2.653

    I'll point out that dgsman indicated only that his stocks yielded 5%. The formula above would be (approximately) correct if all the dividends were reinvested and there were NO dividend growth at all.

    Now if you make some simple dividend growth assumptions too, like 3% per year, then the total value will compound faster, at approximately the sum of the yield + DG rate (5% yield + 3% DG rate ~= 8% compounding).

    1.08^20 = 4.66

    So under those conditions (5% yield and 3% Dividend Growth), the end total value would be approximately:

    $600,000 * 4.66 = $2.79 million.

    That's a tad bit better than $1.6 million, and not an unreasonable projection. You would get the same end value estimate for a 4% yield and a 4% DG rate.

    Of course reality may differ somewhat from the assumed projections, but as a back of the envelope calculation that's not much of a stretch.
    Nov 28, 2015. 04:29 AM | 1 Like Like |Link to Comment
  • Alimentation Couche-Tard In A Bubble? Not A Chance  [View article]
    Go Couche-Tard!!

    They must've figured something out to have such good margins in the convenience store space.
    Nov 27, 2015. 11:06 PM | Likes Like |Link to Comment
  • Is There Anything For MLP Investors To Be Thankful For This Year?  [View article]
    9) Some great MLP investments can be picked up at bargain basement prices.
    Nov 27, 2015. 10:46 AM | 2 Likes Like |Link to Comment
  • My 4% Dividend Yield Portfolio: A Postmortem After One Year  [View article]
    "GLOP is in LNG transport and should be okay as well. ... KNOP however runs shuttle tankers between off-shore production facilities and on-shore refineries. This strikes me as being more exposed than the other two as if the producers cut production in response to price drops, KNOP will take it in the shorts, although the might do okay if they have long term contracts in place." - PendragonY

    Pen,

    Both KNOP and GLOP are in the business of leasing the tankers, not shipping the product (average lease duration ~5.8 years for KNOP, ~8.3+ years for GLOP). Both lease to large multi-national customers who don't get revenue unless their product ships. While anything is possible, I believe it is unlikely that their customers would shut down operations after investing billions to stand it up. Their CapEx is already a sunk cost, the operating gross profit going forward from those wells / terminals is positive and necessary to continue.

    Besides, lower prices generally leads to higher demand, right? More demand = more tanker use.

    GLOP utilization - Time charters generate revenue under daily rates regardless of volume or production levels, distribution coverage 1.37x

    http://bit.ly/1Ngb5GA


    KNOP utilization - 99.6% of fleet, distribution coverage 1.07x

    http://bit.ly/1Ngb5GE
    Nov 27, 2015. 10:35 AM | Likes Like |Link to Comment
  • My 4% Dividend Yield Portfolio: A Postmortem After One Year  [View article]
    "Regarding energy stocks, I feel less confident at this point to add to it. I can't really see the oil price recover in a significant fashion and therefore I don't want to get to a situation of companies that are stressed with cash.
    It might be the great time to buy energy but at this point I would look for the "sleep good at night" candidates." - Ron Honig

    You might find some interesting candidates in the companies which provide support services to the energy industry. In general, they have stable, consistent revenue that is not dependent on the price of oil or natural gas. Some of these businesses have severely been beaten down along with the energy stocks and have high current yields as a result. Naturally you should put in sufficient due diligence to convince yourself that the business is economically sound before buying any shares.

    I have recently picked up shares in KNOP, GLOP, and USAC (all MLPs) which fit this model. They each provide a necessary service to their energy industry (shipping tankers and/or compression equipment) on long term contracts, with good distribution coverage. They also have good prospects for continued growth over the next few years.

    Their share prices are rather volatile, but the underlying businesses appear very stable. You might be able to get shares during one of their dips and give yourself an extra margin for error on the value front.

    I hope that gives you another option to consider. As others have commented, it seems one of the better DGI strategies is to buy stable and growing stocks when they are out of favor, then hold on.

    Just be sure you are sufficiently convinced of the "stable and growing" aspect of the equation before jumping in.
    Nov 27, 2015. 08:51 AM | Likes Like |Link to Comment
  • Can You Define Your Investing Philosophy?  [View article]
    One has to wonder if the AAII Journal is aware of "Magic Pants" as an Investing Philosophy. ;-)
    Nov 25, 2015. 07:47 AM | 2 Likes Like |Link to Comment
COMMENTS STATS
3,103 Comments
6,630 Likes