I agree. This is best held in a retirement account as the corporate structure is not very tax efficient. The more units they buy in, the worse the impact on current after tax cash. In the long run it is supposed to work out ok as the repurchases boost the unit value and you get it back in capital gains and higher distributions/unit. In many respects SGU has a very awkward structure. We have all the complexities of a partnership without the tax benefits of passing losses along to the unit holders.
SGU is an LP, they must distribute all of their income each year to their partners. Since their income is variable, dependent on the weather, they make cash distributions approximating 50% of their long term average income each year. The excess is used to repurchase outstanding units each year.
The distribution that you see ($.326/unit in FY13, for a yield ~6%) is about half of the actual amount that SGU has returned to you.
They also bought back 3.3M units in FY13, reducing units outstanding by 5.4%. This is the other half of your effective yield.
Since you get taxed on the total income, these units are best held in a retirement account.
Over the last four years SGU has distributed $79.9M in cash and used $76.0M to repurchase 17.4M units. This is a real return to unit holders, not an option neutralization program.
2013 was not a very good year for SGU, if held in a taxable account. I calculate $0.326 in distributions and $.493 in taxable dividend income per unit. If you are in the high dividend tax bracket and pay your CT taxes like you are supposed to, you lose 26% of your taxable income or $.128 for taxes. So you keep (.326-.128) =$.198. After tax yield for 2013 was only about .198/5.5 which is less than 4%. Not very impressive on an after tax basis. I guess you get capital gains in the long run if they run the business well, but this corporate structure is no the best for current taxes if they choose to keep more of the cash flow rather than distribute it.
K1 reported income for 2013 is about 50% higher than 2012. Cash distributed in 2013 was only slightly higher than 2012. Position size did not change. Does anyone understand the connection between distributions and reported dividend income? I certainly don't and have asked IR.
With the acquisition of Griffith Services to close in on the second QTR of this year SGU should move into the 2 billion in revenues a 16% jump. With management plan for more acquisition in the future SGU will continue to grow. JMO
Emotionally when its wintertime and cold outside SGU can be a feel good in the moment stock to own...but when the calendar turns to mid March and Spring training begins is it still a feel good in the moment stock to own? They are too dependent on a 3 to 4 month window. They need to diversify more to level the seasonality factor.
Very helpful posts (I wish all the Yahoo Financial Message Boards were this nice). Sounds like it could be considered an undervalued stock worth taking a chance on.
Good bottom line EPS for the quarter; but without the derivative instrument benefit of $13.5 million the bottom line would be quite disappointing. Hard to predict quarter to quarter what SGU will earn or lose when the derivative instruments have to be factored in. Probably explains why there are no analyst estimates.
The thing I like about the management of this company is that they have been buying back shares at a phenomenal rate over the last five years, paid out good dividends during this time, and while doing this managed to retain constant tangible equity while growing the company. Not many companies can do this. When a company buys back shares they can't add it as an asset so it all goes back to the shareholders. This make it even more impressive what they've done. Many companies that pay out good dividends play the old ponzi scheme of issuing shares to pay back share holders. Comments?
Sentiment: Strong Buy
Rev $520. million VS $516.5 million. Net income $19.3 million (.335) VS $9.5 million (.161).During the fiscal 2014 first quarter, net income rose to $19.3 million, an increase of $9.5 million, due largely to a favorable change in the fair value of derivative instruments of $13.4 million. Outstanding shares drop from 60.5 million shares to 57.5 million for the first qtr.
Word of caution: it seems newbes on this board are dwelling on business issues that occurred TEN YEARS AGO! Obviously those events were not acceptable. But all the old management was thrown out 10 years ago and the Company has been doing very well since then. So base your decisions on the current management's successes and therefore the FORWARD expectations. Still acquiring companies and diversifying along the way. This team has served this Company exceptionally well. GL.
Sentiment: Strong Buy
STAR GAS PARTNERS, L.P. ANNOUNCES SUSPENSION OF COMMON UNIT DISTRIBUTION
STAMFORD, CT (October 18, 2004) -- Star Gas Partners, L.P. (the "Partnership" or "Star") (NYSE: SGU, SGH), a diversified home energy distributor and services provider specializing in heating oil and propane, has recently advised its Petro heating oil division bank lenders of a substantial expected decline in earnings for this division for the fiscal year that ended on September 30, 2004, and a further projected decline in earnings for the fiscal year ending September 30, 2005, which will not permit Petro to meet the borrowing conditions under its working capital line.
The source of the problem is a combination of (a) the inability to pass on the full impact of record heating oil prices to customers, and (b) the effects of unusually high customer attrition principally related to its operational restructuring undertaken in the past 18 months. Petro is continuing to submit borrowing requests under its working capital line. Star is in discussions with the lenders to modify conditions and other terms necessary to assure that Petro will have sufficient liquidity to operate through the winter. Star anticipates that because of the requirements of Star's current and potential lenders, it will not be permitted to make any distributions on its Common Units. Star believes that with the support of its existing lenders, which cannot yet be assured, it can manage the extraordinary challenges arising from current energy prices and other factors. However, without that support, Star may be forced to seek interim financing on extremely disadvantageous terms or even to seek to restructure its debts under the protection of the bankruptcy courts.
Net Operating Performance. While the audit for fiscal 2004 is not yet complete, Star anticipates that Petro's reported net income will be substantially below Petro's reported net income for fiscal 2003 and Star currently anticipates that Petro's net income for fiscal 2005
Consistent with what I said on my Jan 27th post, read today's Jan 30 company news release. SGU continues to add more and more value to their bottom line as they have for the past 10 years......
Sentiment: Strong Buy
It was a mismanagement issue. "They/He" (Sevren) was replaced with an excellent fiscally conservative management team, over 10 years ago. Years of restructuring brought the stock back from 2 + to 7 a share.They had sold their propane business and continued with the fuel oil business. The are the largest fuel oil distributer on the east coast. They are back into the propane business as well. SGU took a hit in 2011 when the country had a summer during the winter season. They have been doing well enough to continue to increase their distributions and continue to buy existing companies. I have had SGU since the turn around. The dividend beats any bank.
Sentiment: Strong Buy