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Rick D

Rick D
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  • High Yield In Focus: Should You Buy Into Teekay LNG's 9.6% Yield? [View article]
    SMNeedles,

    TOO is Teekay Offshore Partners. This article is about TGP, Teekay LNG Partners. They are sister companies with the same general partner, Teekay Corporation, but they are in very different businesses.

    Also, I think you misunderstand "yield to worst". "Yield to worst" is the lowest yield you could get on a callable security (assuming no defaults, that it remains at the current price, and that you never voluntarily sell the security). Since it is trading below par, TOO-PA's yield to worst is the same as its current yield: the 9.34% that you state. Think about it this way: even though TOO-PA is callable, if it remains at its current price, why would TOO call in the preferred at par of 25 when they could just buy the preferred units back in the open market at 19.40?

    Here's Investopedia's definition of "yield to worst": http://bit.ly/1vKGKEo

    I'm not disputing that TOO-PA is a good investment, especially at its current price. I own a little of it. But it hasn't got anything to do with TGP other than a common parent, and, barring a meteoric rise in price, you won't get a 17.35% annual return on your investment.
    Aug 2, 2015. 02:56 PM | Likes Like |Link to Comment
  • High Yield In Focus: Should You Buy Into Teekay LNG's 9.6% Yield? [View article]
    oagfy,

    I am a US-based investor. I have owned TGP in a taxable account for a few years now. I have never received a State Schedule, just a basic K-1, and haven't had to file state taxes in other states.
    Aug 2, 2015. 02:31 PM | 1 Like Like |Link to Comment
  • High Yield In Focus: Should You Buy Into Teekay LNG's 9.6% Yield? [View article]
    For the most part this is a decent summary of TGP as an investment. However I would take exception to the statement that LNG activities are suppressed. Some of the more questionable projects won't go ahead but I doubt they would have anyway. There are many good projects that are going forward, among them:

    Australia: Gorgon and Wheatstone
    USA: Sabine Pass
    Russia: Yamal LNG
    Papua New Guinea: ExxonMobil's LNG plant went on line last year.

    Shell also has their Prelude floating LNG production facility under construction.

    TGP is involved with some of these and has long-term charters in place for Sabine Pass and Yamal LNG, providing multiple avenues for accretive future growth.

    Demand for LNG isn't going away because of reduced LNG prices. If anything, reduced prices will increase demand. I really don't expect Teekay to suffer from low LNG prices. (I also don't expect LNG prices to remain low over the life of Teekay's charters anyway.)

    Currently there is a surplus of LNG shipping capacity; however, in the next few years this is projected to become a shortage. I believe the future of LNG shipping is bright and that Teekay is well-positioned to benefit from it.

    The only major downside I see to TGP is that it is now in the 50% IDR tier, limiting future distribution growth.

    And to correct the author, TGP is not a stock. It's an MLP and pays distributions, not dividends. The difference is not academic, particularly tax-wise. Also, one should factor out non-cash items such as depreciation when evaluating the distribution yield. Though it typically isn't as high as GAAP makes it out to be, depreciation is a real long-term cost.

    Disclosure: Long TGP, recently added to my stake and may add more in the near future.
    Aug 1, 2015. 10:18 PM | 4 Likes Like |Link to Comment
  • How Much Kinder Morgan Is Too Much For A Dividend Growth Investor? [View article]
    Gary,

    I wouldn't stress too much over the storage capacity issue. There's more oil in storage than there was 5 years ago, but there's also more capacity than there was 5 years ago. Also, don't forget that Kinder Morgan owns quite a bit of that storage, so they're making money off of it.

    Also, that chart is for crude oil storage, not natural gas. Kinder Morgan has a lot of natural gas pipelines but not that many crude oil pipelines, so this is not really a big deal for them.
    Aug 1, 2015. 03:22 AM | 2 Likes Like |Link to Comment
  • How Much Kinder Morgan Is Too Much For A Dividend Growth Investor? [View article]
    Mike,

    "Jeesh, I'm not sure I understand this company well enough to own it."

    When you get this feeling, the right thing to do is to take the time to understand it well enough to where you ARE comfortable. KMI is in a lot of businesses, so this isn't a small task, but it's what you need to do.

    Awhile back, before everything got combined into just KMI, I was considering investing in the Kinder Morgan entities (KMI, KMP/KMR, and EPB). It took awhile but everything made sense to me. KMI and KMP/KMR looked fine to me. EPB looked a little stretched on its distribution but it wasn't particularly scary. I passed on the investment not because of any problems but because I found what I thought were better opportunities elsewhere.

    I also took a look at LINE/LNCO some time ago, before the oil price collapse. I thought the concept of an upstream MLP was a little questionable. Keeping the distribution stable in the face of a declining oil price requires hedging, but hedges expire. What happens if oil stays down longer than the length of the hedges? Oops... Then I saw they were cutting back on hedges. If I wanted to do what they were doing, I would have gone to a casino. I decided I wouldn't touch LINE/LNCO with a 10 foot pole.

    Spend the time to understand KMI's businesses. I've done it, and I can assure you there is no great disaster awaiting you in the short term, so you can take your time learning about them and then decide what you want to do with your KMI, making your decision with full knowledge.
    Aug 1, 2015. 02:50 AM | 5 Likes Like |Link to Comment
  • How Much Kinder Morgan Is Too Much For A Dividend Growth Investor? [View article]
    Mike,

    To directly answer your question, for now I'd go with Option 1: keep your KMI. When KMI reaches a more reasonable valuation, you might want to go with Option 2.

    Richard Kinder is a smart man, and he's honest. I'm sure he knows his company better than any of those analysts. If he's buying, you should have no trouble sleeping at night with any reasonable-sized position in KMI.

    I believe KMI is a good value at current pricing. The only reason I would sell any would be because I believed there was an even better value elsewhere and I needed to sell some KMI to make that purchase.

    I am concerned by your listing of stocks that you are lumping all energy stocks together. There is only one other midstream name in your list; all the others are in completely different businesses with completely different drivers. KMI can't be compared with the likes of SDRL, HP, COP, XOM, or PSX. Don't let yourself get scared out of a stock because of negative market sentiment about "energy". It seems like the market is bashing all "energy" stocks as though they were all upstream producers. KMI has relatively little exposure to the price of oil.

    I don't personally own any KMI. That isn't because I think less of it. Rather, it's because I see even greater mispricing and greater value in LNG shipping. If you do sell any KMI, you may want to research some of the LNG shipping names. Many are taxed as C-corps so you won't have any K-1 hassles and you can put them in an IRA without complications.
    Jul 28, 2015. 02:03 PM | 3 Likes Like |Link to Comment
  • Why Royal Dutch Shell Offers Huge Value For Income Investors Now [View article]
    Greg,

    If you are still confused about RDS.A vs. RDS.B after reading through the resources I linked to in my response to Greenhorn Investor above, send me a private message and I'll do my best to answer your questions.
    Jul 10, 2015. 04:08 AM | Likes Like |Link to Comment
  • Why Royal Dutch Shell Offers Huge Value For Income Investors Now [View article]
    "Also, US citizens should avoid "A" shares because IRS does not give full credit for the 15% Dutch withholding tax (unless your AGI is near the poverty level)."

    This statement is not correct. Many investors in taxable accounts can receive full credit for the 15% Dutch withholding tax, particularly if their foreign dividends are relatively small. Investors with foreign withholding of $300 or less ($600 if married filing jointly) can usually receive 100% recovery via a single line item on Form 1040, without filing Form 1116. Even some Form 1116 filers can receive full recovery, depending on individual circumstances. You do not have to have near poverty level income for this.

    Again, please see the two resources in my reply to Greenhorn Investor below for CORRECT guidance on which share class to own.
    Jul 8, 2015. 12:11 PM | 1 Like Like |Link to Comment
  • Why Royal Dutch Shell Offers Huge Value For Income Investors Now [View article]
    tomfucito,

    Please see my reply to Greenhorn Investor above. The two resources mentioned in that reply, along with their comments, will answer all your questions.
    Jul 8, 2015. 11:58 AM | Likes Like |Link to Comment
  • Why Royal Dutch Shell Offers Huge Value For Income Investors Now [View article]
    js1moore,

    The scrip program is not suspended. It was recently restarted.

    Shell does not pay all dividends in A shares. If you elect to receive dividends in cash, you will receive cash.

    If you elect to receive dividends in shares via the Scrip Dividend Programme, you will receive A shares. Due to quirks of Dutch tax law Shell cannot issue B shares under this program.

    In an IRA, you should own A shares if you reinvest dividends via the SDP. You should only own B shares if you wish to receive cash or if your broker does not participate in the SDP.

    There is a lot of misinformation out there, including in some comments in this article. For CORRECT information, please see the two resources mentioned in my reply to Greenhorn above.
    Jul 8, 2015. 11:52 AM | Likes Like |Link to Comment
  • Why Royal Dutch Shell Offers Huge Value For Income Investors Now [View article]
    For the most recent quarter, basic CCS earnings per ADS were $1.52/ADS. Basic CCS earnings per ADS excluding identified items were $1.04/ADS. The dividend was $0.94/ADS.

    Shell is not borrowing to pay the dividend. Its dividend is fully covered by earnings.

    Shell's capital expenditures should decline in the near future as projects are completed and fewer new projects are started, while revenues resulting from past capex should increase as projects come on line.

    Shell's dividend appears to be reasonably secure.
    Jul 8, 2015. 11:41 AM | 4 Likes Like |Link to Comment
  • Why Royal Dutch Shell Offers Huge Value For Income Investors Now [View article]
    PayNoAttention,

    Your post is not entirely correct.

    In a tax-deferred or tax-exempt account, you should own A shares if you reinvest dividends via Shell's Scrip Dividend Programme and you should own B shares if you take dividends in cash or reinvest dividends via a broker's own DRIP.

    B shares do not necessarily pay dividends in A shares. They only do this if you enroll them in Shell's Scrip Dividend Programme, which you probably don't want to do because then you'd have both share classes in the same account. If you want to reinvest dividends via the SDP, you should own only A shares regardless of the account type. There is no Dutch tax withholding on dividends reinvested via the SDP.

    If you wish to avoid the Dutch withholding tax (and you do if you are investing in an IRA) you should either own B shares or enroll in the SDP. It is neither necessary nor desirable to do both.

    Please see the two resources in my other post for accurate information.
    Jul 7, 2015. 11:11 PM | 5 Likes Like |Link to Comment
  • Why Royal Dutch Shell Offers Huge Value For Income Investors Now [View article]
    Greenhorn,

    For guidance on choosing a Shell share class, please see the following:

    Dividends Boom's article and its comments (comprehensive but very long): http://seekingalpha.co...

    My Instablog post (shorter; adequate basic guidance for most): http://seekingalpha.co...
    Jul 7, 2015. 10:05 PM | 3 Likes Like |Link to Comment
  • Why Royal Dutch Shell Offers Huge Value For Income Investors Now [View article]
    Dividendor, did you assume some particular rate of increase in dividends and/or share price when you came up with your 8 year figure?

    Rule of 72: 72 / 6.6 = 10.9 years.

    Annual compounding at 6.6%: 1.066 ^ 8 years = 1.667.

    Quarterly compounding (assumes dividend reinvestment and no change in share price or dividend): 1.0165 ^ 32 quarters = 1.688.

    You've got to have dividend hikes or share price increases to double your money in 8 years.
    Jul 7, 2015. 09:59 PM | 9 Likes Like |Link to Comment
  • U.S. crude sinks 7.7% to $52.53 in worst day since April [View news story]
    Dallas,

    That's a good reason to be invested in only the best capitalized oil producers. Oil producers with heavy debt loads are going to be in a world of hurt after their hedges expire.
    Jul 7, 2015. 03:19 PM | Likes Like |Link to Comment
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