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10.5% Sustainable, Qualified Dividend Yield Play With Growth (That's Not A Misprint)

Apr. 05, 2018 5:23 PM ETHöegh LNG Partners LP (HMLP)62 Comments
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Dividend Master


  • The LNG industry is booming and HMLP is a less risky way to play it.
  • The company has unique, long-term charter cash flows locked in place.
  • Incredibly, HMLP gets qualified dividend treatment.

Hoegh LNG Partners LP (NYSE:HMLP) is an MLP headquartered in Bermuda that owns and charters out FSRU ships as well as two LNG carriers. HMLP trades on the NYSE, has a $550-million market cap, and in the last year has averaged 75,000 shares per day trading volume. Foreign MLPs (there aren't many) can choose how they want to be treated for U.S. tax purposes. HMLP elects to be treated as a corporation for U.S. tax purposes. This is crucial because investors do not have to deal with a K-1 for tax purposes, and it's captured on a 1099 like any regular stock in the U.S.

Even better, HMLP's dividend gets qualified dividend status. Its 10%-plus dividend yield makes it very attractive in taxable accounts. HMLP also has an 8.75% preferred stock issue that gets qualified dividend status as per Form 20-F. I can attest to that fact as Interactive Brokers gave me qualified dividend status on my 2017 1099.

The U.S. natural gas industry has boomed in terms of quantities produced in the last 10 years. This has worked out very well for users of natural gas, less so for those depending on the price of natural gas to earn profits in its production. Because production has been so strong, exports of natural gas in the form of liquefied natural gas (LNG) has also taken off in recent years. Cheniere Energy (LNG) has converted its operations in Louisiana (Sabine Pass LNG) from receiving LNG from foreign producers to instead taking in U.S. produced natural gas and converting it to LNG to be exported abroad. A second LNG export operation has just started at Dominion Energy's (D) Cove Point plant on the East Coast. Other large natural gas producers around the world are setting up like the U.S. to export

This article was written by

Dividend Master profile picture
20yrs in mortgage trading at several big shops followed by switch to buy side last 10yrs. Now a macro events equity oriented carry trader in high cash payout plays and when to get in/out . Focus on retail oriented small caps such as mortgage REITs , closed end funds , energy trusts , preferred stocks and most any investment with high cash payouts linked more to macro events like rates , commodities , credit markets , etc . My core back ground is the bond business

Analyst’s Disclosure: I am/we are long HMLP WITH A 3% POSITION. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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